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110th Congress                                            Rept. 110-374
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================
 
     PAUL WELLSTONE MENTAL HEALTH AND ADDICTION EQUITY ACT OF 2007

                                _______
                                

                October 15, 2007.--Ordered to be printed

                                _______
                                

 Mr. George Miller of California, from the Committee on Education and 
                     Labor, submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 1424]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Education and Labor, to whom was referred 
the bill (H.R. 1424) to amend section 712 of the Employee 
Retirement Income Security Act of 1974, section 2705 of the 
Public Health Service Act, and section 9812 of the Internal 
Revenue Code of 1986 to require equity in the provision of 
mental health and substance-related disorder benefits under 
group health plans, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Paul Wellstone 
Mental Health and Addiction Equity Act of 2007''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Employee Retirement Income Security Act of 
1974.
Sec. 3. Amendments to the Public Health Service Act relating to the 
group market.
Sec. 5. Amendments to the Internal Revenue Code of 1986.
Sec. 5. Government Accountability Office studies and reports.

SEC. 2. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
                    1974.

  (a) Extension of Parity to Treatment Limits and Beneficiary Financial 
Requirements.--Section 712 of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1185a) is amended--
          (1) in subsection (a), by adding at the end the following new 
        paragraphs:
          ``(3) Treatment limits.--
                  ``(A) No treatment limit.--If the plan or coverage 
                does not include a treatment limit (as defined in 
                subparagraph (D)) on substantially all medical and 
                surgical benefits in any category of items or services, 
                the plan or coverage may not impose any treatment limit 
                on mental health or substance-related disorder benefits 
                that are classified in the same category of items or 
                services.
                  ``(B) Treatment limit.--If the plan or coverage 
                includes a treatment limit on substantially all medical 
                and surgical benefits in any category of items or 
                services, the plan or coverage may not impose such a 
                treatment limit on mental health or substance-related 
                disorder benefits for items and services within such 
                category that is more restrictive than the predominant 
                treatment limit that is applicable to medical and 
                surgical benefits for items and services within such 
                category.
                  ``(C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this paragraph 
                and paragraph (4), there shall be the following five 
                categories of items and services for benefits, whether 
                medical and surgical benefits or mental health and 
                substance-related disorder benefits, and all medical 
                and surgical benefits and all mental health and 
                substance related benefits shall be classified into one 
                of the following categories:
                          ``(i) Inpatient, in-network.--Items and 
                        services not described in clause (v) furnished 
                        on an inpatient basis and within a network of 
                        providers established or recognized under such 
                        plan or coverage.
                          ``(ii) Inpatient, out-of-network.--Items and 
                        services not described in clause (v) furnished 
                        on an inpatient basis and outside any network 
                        of providers established or recognized under 
                        such plan or coverage.
                          ``(iii) Outpatient, in-network.--Items and 
                        services not described in clause (v) furnished 
                        on an outpatient basis and within a network of 
                        providers established or recognized under such 
                        plan or coverage.
                          ``(iv) Outpatient, out-of-network.--Items and 
                        services not described in clause (v) furnished 
                        on an outpatient basis and outside any network 
                        of providers established or recognized under 
                        such plan or coverage.
                          ``(v) Emergency care.--Items and services, 
                        whether furnished on an inpatient or outpatient 
                        basis or within or outside any network of 
                        providers, required for the treatment of an 
                        emergency medical condition (including an 
                        emergency condition relating to mental health 
                        and substance-related disorders).
                  ``(D) Treatment limit defined.--For purposes of this 
                paragraph, the term `treatment limit' means, with 
                respect to a plan or coverage, limitation on the 
                frequency of treatment, number of visits or days of 
                coverage, or other similar limit on the duration or 
                scope of treatment under the plan or coverage.
                  ``(E) Predominance.--For purposes of this subsection, 
                a treatment limit or financial requirement with respect 
                to a category of items and services is considered to be 
                predominant if it is the most common or frequent of 
                such type of limit or requirement with respect to such 
                category of items and services.
          ``(4) Beneficiary financial requirements.--
                  ``(A) No beneficiary financial requirement.--If the 
                plan or coverage does not include a beneficiary 
                financial requirement (as defined in subparagraph (C)) 
                on substantially all medical and surgical benefits 
                within a category of items and services (specified 
                under paragraph (3)(C)), the plan or coverage may not 
                impose such a beneficiary financial requirement on 
                mental health or substance-related disorder benefits 
                for items and services within such category.
                  ``(B) Beneficiary financial requirement.--
                          ``(i) Treatment of deductibles, out-of-pocket 
                        limits, and similar financial requirements.--If 
                        the plan or coverage includes a deductible, a 
                        limitation on out-of-pocket expenses, or 
                        similar beneficiary financial requirement that 
                        does not apply separately to individual items 
                        and services on substantially all medical and 
                        surgical benefits within a category of items 
                        and services (as specified in paragraph 
                        (3)(C)), the plan or coverage shall apply such 
                        requirement (or, if there is more than one such 
                        requirement for such category of items and 
                        services, the predominant requirement for such 
                        category) both to medical and surgical benefits 
                        within such category and to mental health and 
                        substance-related disorder benefits within such 
                        category and shall not distinguish in the 
                        application of such requirement between such 
                        medical and surgical benefits and such mental 
                        health and substance-related disorder benefits.
                          ``(ii) Other financial requirements.--If the 
                        plan or coverage includes a beneficiary 
                        financial requirement not described in clause 
                        (i) on substantially all medical and surgical 
                        benefits within a category of items and 
                        services, the plan or coverage may not impose 
                        such financial requirement on mental health or 
                        substance-related disorder benefits for items 
                        and services within such category in a way that 
                        results in greater out-of-pocket expenses to 
                        the participant or beneficiary than the 
                        predominant beneficiary financial requirement 
                        applicable to medical and surgical benefits for 
                        items and services within such category.
                          ``(iii) Construction.--Nothing in this 
                        subparagraph shall be construed as prohibiting 
                        the plan or coverage from waiving the 
                        application of any deductible for mental health 
                        benefits or substance-related disorder benefits 
                        or both.
                  ``(C) Beneficiary financial requirement defined.--For 
                purposes of this paragraph, the term `beneficiary 
                financial requirement' includes, with respect to a plan 
                or coverage, any deductible, coinsurance, co-payment, 
                other cost sharing, and limitation on the total amount 
                that may be paid by a participant or beneficiary with 
                respect to benefits under the plan or coverage, but 
                does not include the application of any aggregate 
                lifetime limit or annual limit.''; and
          (2) in subsection (b)--
                  (A) by striking ``construed--'' and all that follows 
                through ``(1) as requiring'' and inserting ``construed 
                as requiring'';
                  (B) by striking ``; or'' and inserting a period; and
                  (C) by striking paragraph (2).
  (b) Expansion to Substance-Related Disorder Benefits and Revision of 
Definition.--Such section is further amended--
          (1) by striking ``mental health benefits'' and inserting 
        ``mental health or substance-related disorder benefits'' each 
        place it appears; and
          (2) in paragraph (4) of subsection (e)--
                  (A) by striking ``Mental health benefits'' and 
                inserting ``Mental health and substance-related 
                disorder benefits'';
                  (B) by striking ``benefits with respect to mental 
                health services'' and inserting ``benefits with respect 
                to services for mental health conditions or substance-
                related disorders''; and
                  (C) by striking ``, but does not include benefits 
                with respect to treatment of substance abuse or 
                chemical dependency''.
  (c) Availability of Plan Information About Criteria for Medical 
Necessity.--Subsection (a) of such section, as amended by subsection 
(a)(1), is further amended by adding at the end the following new 
paragraph:
          ``(5) Availability of plan information.--The criteria for 
        medical necessity determinations made under the plan with 
        respect to mental health and substance-related disorder 
        benefits (or the health insurance coverage offered in 
        connection with the plan with respect to such benefits) shall 
        be made available in accordance with regulations by the plan 
        administrator (or the health insurance issuer offering such 
        coverage) to any current or potential participant, beneficiary, 
        or contracting provider upon request. The reason for any denial 
        under the plan (or coverage) of reimbursement or payment for 
        services with respect to mental health and substance-related 
        disorder benefits in the case of any participant or beneficiary 
        shall, upon request, be made available in accordance with 
        regulations by the plan administrator (or the health insurance 
        issuer offering such coverage) to the participant or 
        beneficiary.''.
  (d) Minimum Benefit Requirements.--Subsection (a) of such section is 
further amended by adding at the end the following new paragraph:
          ``(6) Minimum scope of coverage and equity in out-of-network 
        benefits.--
                  ``(A) Minimum scope of mental health and substance-
                related disorder benefits.--In the case of a group 
                health plan (or health insurance coverage offered in 
                connection with such a plan) that provides any mental 
                health or substance-related disorder benefits, the plan 
                or coverage shall include benefits for any mental 
                health condition and substance-related disorder for 
                which benefits are provided under the benefit plan 
                option offered under chapter 89 of title 5, United 
                States Code, with the highest average enrollment as of 
                the beginning of the most recent year beginning on or 
                before the beginning of the plan year involved.
                  ``(B) Equity in coverage of out-of-network 
                benefits.--
                          ``(i) In general.--In the case of a plan or 
                        coverage that provides both medical and 
                        surgical benefits and mental health or 
                        substance-related disorder benefits, if medical 
                        and surgical benefits are provided for 
                        substantially all items and services in a 
                        category specified in clause (ii) furnished 
                        outside any network of providers established or 
                        recognized under such plan or coverage, the 
                        mental health and substance-related disorder 
                        benefits shall also be provided for items and 
                        services in such category furnished outside any 
                        network of providers established or recognized 
                        under such plan or coverage in accordance with 
                        the requirements of this section.
                          ``(ii) Categories of items and services.--For 
                        purposes of clause (i), there shall be the 
                        following three categories of items and 
                        services for benefits, whether medical and 
                        surgical benefits or mental health and 
                        substance-related disorder benefits, and all 
                        medical and surgical benefits and all mental 
                        health and substance-related disorder benefits 
                        shall be classified into one of the following 
                        categories:
                                  ``(I) Emergency.--Items and services, 
                                whether furnished on an inpatient or 
                                outpatient basis, required for the 
                                treatment of an emergency medical 
                                condition (including an emergency 
                                condition relating to mental health or 
                                substance-related disorders).
                                  ``(II) Inpatient.--Items and services 
                                not described in subclause (I) 
                                furnished on an inpatient basis.
                                  ``(III) Outpatient.--Items and 
                                services not described in subclause (I) 
                                furnished on an outpatient basis.''.
  (e) Construction.--Subsection (a) of such section is further amended 
by adding at the end the following new paragraph:
          ``(7) Construction.--Nothing in this section shall be 
        construed to limit a group health plan (or health insurance 
        offered in connection with such a plan) from managing the 
        provision of medical, surgical, mental health or substance-
        related disorder benefits through any of the following methods:
                  ``(A) the application of utilization review;
                  ``(B) the application of authorization or management 
                practices;
                  ``(C) the application of medical necessity and 
                appropriateness criteria; or
                  ``(D) other processes intended to ensure that 
                beneficiaries receive appropriate care and medically 
                necessary services for covered benefits;
        to the extent such methods are recognized both by industry and 
        by providers and are not prohibited under applicable State 
        laws.''.
  (f) Revision of Increased Cost Exemption.--Paragraph (2) of 
subsection (c) of such section is amended to read as follows:
          ``(2) Increased cost exemption.--
                  ``(A) In general.--With respect to a group health 
                plan (or health insurance coverage offered in 
                connection with such a plan), if the application of 
                this section to such plan (or coverage) results in an 
                increase for the plan year involved of the actual total 
                costs of coverage with respect to medical and surgical 
                benefits and mental health and substance-related 
                disorder benefits under the plan (as determined and 
                certified under subparagraph (C)) by an amount that 
                exceeds the applicable percentage described in 
                subparagraph (B) of the actual total plan costs, the 
                provisions of this section shall not apply to such plan 
                (or coverage) during the following plan year, and such 
                exemption shall apply to the plan (or coverage) for 1 
                plan year.
                  ``(B) Applicable percentage.--With respect to a plan 
                (or coverage), the applicable percentage described in 
                this paragraph shall be--
                          ``(i) 2 percent in the case of the first plan 
                        year which begins after the effective date of 
                        the amendments made by section 101 of the Paul 
                        Wellstone Mental Health and Addiction Equity 
                        Act of 2007; and
                          ``(ii) 1 percent in the case of each 
                        subsequent plan year.
                  ``(C) Determinations by actuaries.--Determinations as 
                to increases in actual costs under a plan (or coverage) 
                for purposes of this subsection shall be made and 
                certified by a qualified and licensed actuary who is a 
                member in good standing of the American Academy of 
                Actuaries.
                  ``(D) 6-month determinations.--If a group health plan 
                (or a health insurance issuer offering coverage in 
                connection with such a plan) seeks an exemption under 
                this paragraph, determinations under subparagraph (A) 
                shall be made after such plan (or coverage) has 
                complied with this section for the first 6 months of 
                the plan year involved.
                  ``(E) Notification.--An election to modify coverage 
                of mental health and substance-related disorder 
                benefits as permitted under this paragraph shall be 
                treated as a material modification in the terms of the 
                plan as described in section 102(a) and notice of which 
                shall be provided a reasonable period in advance of the 
                change.
                  ``(F) Notification of appropriate agency.--
                          ``(i) In general.--A group health plan that, 
                        based on upon a certification described under 
                        subparagraph (C), qualifies for an exemption 
                        under this paragraph, and elects to implement 
                        the exemption, shall notify the Department of 
                        Labor of such election.
                          ``(ii) Requirement.--A notification under 
                        clause (i) shall include--
                                  ``(I) a description of the number of 
                                covered lives under the plan (or 
                                coverage) involved at the time of the 
                                notification, and as applicable, at the 
                                time of any prior election of the cost-
                                exemption under this paragraph by such 
                                plan (or coverage);
                                  ``(II) for both the plan year upon 
                                which a cost exemption is sought and 
                                the year prior, a description of the 
                                actual total costs of coverage with 
                                respect to medical and surgical 
                                benefits and mental health and 
                                substance-related disorder benefits 
                                under the plan; and
                                  ``(III) for both the plan year upon 
                                which a cost exemption is sought and 
                                the year prior, the actual total costs 
                                of coverage with respect to mental 
                                health and substance-related disorder 
                                benefits under the plan.
                          ``(iii) Confidentiality.--A notification 
                        under clause (i) shall be confidential. The 
                        Department of Labor shall make available, upon 
                        request to the appropriate committees of 
                        Congress and on not more than an annual basis, 
                        an anonymous itemization of such notifications, 
                        that includes--
                                  ``(I) a breakdown of States by the 
                                size and any type of employers 
                                submitting such notification; and
                                  ``(II) a summary of the data received 
                                under clause (ii).
                  ``(G) No impact on application of state law.--The 
                fact that a plan or coverage is exempt from the 
                provisions of this section under subparagraph (A) shall 
                not affect the application of State law to such plan or 
                coverage.''.
  (g) Change in Exclusion for Smallest Employers.--Subsection (c)(1)(B) 
of such section is amended--
          (1) by inserting ``(or 1 in the case of an employer residing 
        in a State that permits small groups to include a single 
        individual)'' after ``at least 2'' the first place it appears; 
        and
          (2) by striking ``and who employs at least 2 employees on the 
        first day of the plan year''.
  (h) Elimination of Sunset Provision.--Such section is amended by 
striking subsection (f).
  (i) Clarification Regarding Preemption.--Such section is further 
amended by inserting after subsection (e) the following new subsection:
  ``(f) Preemption, Relation to State Laws.--
          ``(1) In general.--This part shall not be construed to 
        supersede any provision of State law which establishes, 
        implements, or continues in effect any consumer protections, 
        benefits, methods of access to benefits, rights, external 
        review programs, or remedies solely relating to health 
        insurance issuers in connection with group health insurance 
        coverage (including benefit mandates or regulation of group 
        health plans of 50 or fewer employees) except to the extent 
        that such provision prevents the application of a requirement 
        of this part.
          ``(2) Continued preemption with respect to group health 
        plans.--Nothing in this section shall be construed to affect or 
        modify the provisions of section 514 with respect to group 
        health plans.
          ``(3) Other state laws.--Nothing in this section shall be 
        construed to exempt or relieve any person from any laws of any 
        State not solely related to health insurance issuers in 
        connection with group health coverage insofar as they may now 
        or hereafter relate to insurance, health plans, or health 
        coverage.' ''.
  (j) Conforming Amendments to Heading.--
          (1) In general.--The heading of such section is amended to 
        read as follows:

``SEC. 712. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER 
                    BENEFITS.''.

          (2) Clerical amendment.--The table of contents in section 1 
        of such Act is amended by striking the item relating to section 
        712 and inserting the following new item:

``Sec. 712. Equity in mental health and substance-related disorder 
benefits.''.

  (k) Effective Date.--
          (1) In general.--The amendments made by this section shall 
        apply with respect to plan years beginning on or after January 
        1, 2008.
          (2) Special rule for collective bargaining agreements.--In 
        the case of a group health plan maintained pursuant to one or 
        more collective bargaining agreements between employee 
        representatives and one or more employers ratified before the 
        date of the enactment of this Act, the amendments made by this 
        section shall not apply to plan years beginning before the 
        later of--
                  (A) the date on which the last of the collective 
                bargaining agreements relating to the plan terminates 
                (determined without regard to any extension thereof 
                agreed to after the date of the enactment of this Act), 
                or
                  (B) January 1, 2010.
        For purposes of subparagraph (A), any plan amendment made 
        pursuant to a collective bargaining agreement relating to the 
        plan which amends the plan solely to conform to any requirement 
        imposed under an amendment under this section shall not be 
        treated as a termination of such collective bargaining 
        agreement.
  (l) DOL Annual Sample Compliance.--The Secretary of Labor shall 
annually sample and conduct random audits of group health plans (and 
health insurance coverage offered in connection with such plans) in 
order to determine their compliance with the amendments made by this 
Act and shall submit to the appropriate committees of Congress an 
annual report on such compliance with such amendments.
  (m) Assistance to Participants and Beneficiaries.--The Secretary of 
Labor shall provide assistance to participants and beneficiaries of 
group health plans with any questions or problems with compliance with 
the requirements of this Act. The Secretary shall notify participants 
and beneficiaries when they can obtain assistance from State consumer 
and insurance agencies and the Secretary shall coordinate with State 
agencies to ensure that participants and beneficiaries are protected 
and afforded the rights provided under this Act.

SEC. 3. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT RELATING TO THE 
                    GROUP MARKET.

  (a) Extension of Parity to Treatment Limits and Beneficiary Financial 
Requirements.--Section 2705 of the Public Health Service Act (42 U.S.C. 
300gg-5) is amended--
          (1) in subsection (a), by adding at the end the following new 
        paragraphs:
          ``(3) Treatment limits.--
                  ``(A) No treatment limit.--If the plan or coverage 
                does not include a treatment limit (as defined in 
                subparagraph (D)) on substantially all medical and 
                surgical benefits in any category of items or services 
                (specified in subparagraph (C)), the plan or coverage 
                may not impose any treatment limit on mental health and 
                substance-related disorder benefits that are classified 
                in the same category of items or services.
                  ``(B) Treatment limit.--If the plan or coverage 
                includes a treatment limit on substantially all medical 
                and surgical benefits in any category of items or 
                services, the plan or coverage may not impose such a 
                treatment limit on mental health and substance-related 
                disorder benefits for items and services within such 
                category that are more restrictive than the predominant 
                treatment limit that is applicable to medical and 
                surgical benefits for items and services within such 
                category.
                  ``(C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this paragraph 
                and paragraph (4), there shall be the following four 
                categories of items and services for benefits, whether 
                medical and surgical benefits or mental health and 
                substance-related disorder benefits, and all medical 
                and surgical benefits and all mental health and 
                substance related benefits shall be classified into one 
                of the following categories:
                          ``(i) Inpatient, in-network.--Items and 
                        services furnished on an inpatient basis and 
                        within a network of providers established or 
                        recognized under such plan or coverage.
                          ``(ii) Inpatient, out-of-network.--Items and 
                        services furnished on an inpatient basis and 
                        outside any network of providers established or 
                        recognized under such plan or coverage.
                          ``(iii) Outpatient, in-network.--Items and 
                        services furnished on an outpatient basis and 
                        within a network of providers established or 
                        recognized under such plan or coverage.
                          ``(iv) Outpatient, out-of-network.--Items and 
                        services furnished on an outpatient basis and 
                        outside any network of providers established or 
                        recognized under such plan or coverage.
                  ``(D) Treatment limit defined.--For purposes of this 
                paragraph, the term `treatment limit' means, with 
                respect to a plan or coverage, limitation on the 
                frequency of treatment, number of visits or days of 
                coverage, or other similar limit on the duration or 
                scope of treatment under the plan or coverage.
                  ``(E) Predominance.--For purposes of this subsection, 
                a treatment limit or financial requirement with respect 
                to a category of items and services is considered to be 
                predominant if it is the most common or frequent of 
                such type of limit or requirement with respect to such 
                category of items and services.
          ``(4) Beneficiary financial requirements.--
                  ``(A) No beneficiary financial requirement.--If the 
                plan or coverage does not include a beneficiary 
                financial requirement (as defined in subparagraph (C)) 
                on substantially all medical and surgical benefits 
                within a category of items and services (specified in 
                paragraph (3)(C)), the plan or coverage may not impose 
                such a beneficiary financial requirement on mental 
                health and substance-related disorder benefits for 
                items and services within such category.
                  ``(B) Beneficiary financial requirement.--
                          ``(i) Treatment of deductibles, out-of-pocket 
                        limits, and similar financial requirements.--If 
                        the plan or coverage includes a deductible, a 
                        limitation on out-of-pocket expenses, or 
                        similar beneficiary financial requirement that 
                        does not apply separately to individual items 
                        and services on substantially all medical and 
                        surgical benefits within a category of items 
                        and services, the plan or coverage shall apply 
                        such requirement (or, if there is more than one 
                        such requirement for such category of items and 
                        services, the predominant requirement for such 
                        category) both to medical and surgical benefits 
                        within such category and to mental health and 
                        substance-related disorder benefits within such 
                        category and shall not distinguish in the 
                        application of such requirement between such 
                        medical and surgical benefits and such mental 
                        health and substance-related disorder benefits.
                          ``(ii) Other financial requirements.--If the 
                        plan or coverage includes a beneficiary 
                        financial requirement not described in clause 
                        (i) on substantially all medical and surgical 
                        benefits within a category of items and 
                        services, the plan or coverage may not impose 
                        such financial requirement on mental health and 
                        substance-related disorder benefits for items 
                        and services within such category in a way that 
                        is more costly to the participant or 
                        beneficiary than the predominant beneficiary 
                        financial requirement applicable to medical and 
                        surgical benefits for items and services within 
                        such category.
                  ``(C) Beneficiary financial requirement defined.--For 
                purposes of this paragraph, the term `beneficiary 
                financial requirement' includes, with respect to a plan 
                or coverage, any deductible, coinsurance, co-payment, 
                other cost sharing, and limitation on the total amount 
                that may be paid by a participant or beneficiary with 
                respect to benefits under the plan or coverage, but 
                does not include the application of any aggregate 
                lifetime limit or annual limit.''; and
          (2) in subsection (b)--
                  (A) by striking ``construed--'' and all that follows 
                through ``(1) as requiring'' and inserting ``construed 
                as requiring'';
                  (B) by striking ``; or'' and inserting a period; and
                  (C) by striking paragraph (2).
  (b) Expansion to Substance-Related Disorder Benefits and Revision of 
Definition.--Such section is further amended--
          (1) by striking ``mental health benefits'' and inserting 
        ``mental health and substance-related disorder benefits'' each 
        place it appears; and
          (2) in paragraph (4) of subsection (e)--
                  (A) by striking ``Mental health benefits'' and 
                inserting ``Mental health and substance-related 
                disorder benefits'';
                  (B) by striking ``benefits with respect to mental 
                health services'' and inserting ``benefits with respect 
                to services for mental health conditions or substance-
                related disorders''; and
                  (C) by striking ``, but does not include benefits 
                with respect to treatment of substances abuse or 
                chemical dependency''.
  (c) Availability of Plan Information About Criteria for Medical 
Necessity.--Subsection (a) of such section, as amended by subsection 
(a)(1), is further amended by adding at the end the following new 
paragraph:
          ``(5) Availability of plan information.--The criteria for 
        medical necessity determinations made under the plan with 
        respect to mental health and substance-related disorder 
        benefits (or the health insurance coverage offered in 
        connection with the plan with respect to such benefits) shall 
        be made available by the plan administrator (or the health 
        insurance issuer offering such coverage) to any current or 
        potential participant, beneficiary, or contracting provider 
        upon request. The reason for any denial under the plan (or 
        coverage) of reimbursement or payment for services with respect 
        to mental health and substance-related disorder benefits in the 
        case of any participant or beneficiary shall, upon request, be 
        made available by the plan administrator (or the health 
        insurance issuer offering such coverage) to the participant or 
        beneficiary.''.
  (d) Minimum Benefit Requirements.--Subsection (a) of such section is 
further amended by adding at the end the following new paragraph:
          ``(6) Minimum scope of coverage and equity in out-of-network 
        benefits.--
                  ``(A) Minimum scope of mental health and substance-
                related disorder benefits.--In the case of a group 
                health plan (or health insurance coverage offered in 
                connection with such a plan) that provides any mental 
                health and substance-related disorder benefits, the 
                plan or coverage shall include benefits for any mental 
                health condition or substance-related disorder for 
                which benefits are provided under the benefit plan 
                option offered under chapter 89 of title 5, United 
                States Code, with the highest average enrollment as of 
                the beginning of the most recent year beginning on or 
                before the beginning of the plan year involved.
                  ``(B) Equity in coverage of out-of-network 
                benefits.--
                          ``(i) In general.--In the case of a plan or 
                        coverage that provides both medical and 
                        surgical benefits and mental health and 
                        substance-related disorder benefits, if medical 
                        and surgical benefits are provided for 
                        substantially all items and services in a 
                        category specified in clause (ii) furnished 
                        outside any network of providers established or 
                        recognized under such plan or coverage, the 
                        mental health and substance-related disorder 
                        benefits shall also be provided for items and 
                        services in such category furnished outside any 
                        network of providers established or recognized 
                        under such plan or coverage in accordance with 
                        the requirements of this section.
                          ``(ii) Categories of items and services.--For 
                        purposes of clause (i), there shall be the 
                        following three categories of items and 
                        services for benefits, whether medical and 
                        surgical benefits or mental health and 
                        substance-related disorder benefits, and all 
                        medical and surgical benefits and all mental 
                        health and substance-related disorder benefits 
                        shall be classified into one of the following 
                        categories:
                                  ``(I) Emergency.--Items and services, 
                                whether furnished on an inpatient or 
                                outpatient basis, required for the 
                                treatment of an emergency medical 
                                condition (including an emergency 
                                condition relating to mental health and 
                                substance-related disorders).
                                  ``(II) Inpatient.--Items and services 
                                not described in subclause (I) 
                                furnished on an inpatient basis.
                                  ``(III) Outpatient.--Items and 
                                services not described in subclause (I) 
                                furnished on an outpatient basis.''.
  (e) Revision of Increased Cost Exemption.--Paragraph (2) of 
subsection (c) of such section is amended to read as follows:
          ``(2) Increased cost exemption.--
                  ``(A) In general.--With respect to a group health 
                plan (or health insurance coverage offered in 
                connection with such a plan), if the application of 
                this section to such plan (or coverage) results in an 
                increase for the plan year involved of the actual total 
                costs of coverage with respect to medical and surgical 
                benefits and mental health and substance-related 
                disorder benefits under the plan (as determined and 
                certified under subparagraph (C)) by an amount that 
                exceeds the applicable percentage described in 
                subparagraph (B) of the actual total plan costs, the 
                provisions of this section shall not apply to such plan 
                (or coverage) during the following plan year, and such 
                exemption shall apply to the plan (or coverage) for 1 
                plan year.
                  ``(B) Applicable percentage.--With respect to a plan 
                (or coverage), the applicable percentage described in 
                this paragraph shall be--
                          ``(i) 2 percent in the case of the first plan 
                        year which begins after the date of the 
                        enactment of the Paul Wellstone Mental Health 
                        and Addiction Equity Act of 2007; and
                          ``(ii) 1 percent in the case of each 
                        subsequent plan year.
                  ``(C) Determinations by actuaries.--Determinations as 
                to increases in actual costs under a plan (or coverage) 
                for purposes of this subsection shall be made by a 
                qualified actuary who is a member in good standing of 
                the American Academy of Actuaries. Such determinations 
                shall be certified by the actuary and be made available 
                to the general public.
                  ``(D) 6-month determinations.--If a group health plan 
                (or a health insurance issuer offering coverage in 
                connection with such a plan) seeks an exemption under 
                this paragraph, determinations under subparagraph (A) 
                shall be made after such plan (or coverage) has 
                complied with this section for the first 6 months of 
                the plan year involved.
                  ``(E) Notification.--A group health plan under this 
                part shall comply with the notice requirement under 
                section 712(c)(2)(E) of the Employee Retirement Income 
                Security Act of 1974 with respect to the a modification 
                of mental health and substance-related disorder 
                benefits as permitted under this paragraph as if such 
                section applied to such plan.''.
  (f) Change in Exclusion for Smallest Employers.--Subsection (c)(1)(B) 
of such section is amended--
          (1) by inserting ``(or 1 in the case of an employer residing 
        in a State that permits small groups to include a single 
        individual)'' after ``at least 2'' the first place it appears; 
        and
          (2) by striking ``and who employs at least 2 employees on the 
        first day of the plan year''.
  (g) Elimination of Sunset Provision.--Such section is amended by 
striking out subsection (f).
  (h) Clarification Regarding Preemption.--Such section is further 
amended by inserting after subsection (e) the following new subsection:
  ``(f) Preemption, Relation to State Laws.--
          ``(1) In general.--Nothing in this section shall be construed 
        to preempt any State law that provides greater consumer 
        protections, benefits, methods of access to benefits, rights or 
        remedies that are greater than the protections, benefits, 
        methods of access to benefits, rights or remedies provided 
        under this section.
          ``(2) Construction.--Nothing in this section shall be 
        construed to affect or modify the provisions of section 2723 
        with respect to group health plans.''.
  (i) Conforming Amendment to Heading.--The heading of such section is 
amended to read as follows:

``SEC. 2705.''.

  (j) Effective Date.--The amendments made by this section shall apply 
with respect to plan years beginning on or after January 1, 2008.

SEC. 4. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.

  (a) Extension of Parity to Treatment Limits and Beneficiary Financial 
Requirements.--Section 9812 of the Internal Revenue Code of 1986 is 
amended--
          (1) in subsection (a), by adding at the end the following new 
        paragraphs:
          ``(3) Treatment limits.--
                  ``(A) No treatment limit.--If the plan does not 
                include a treatment limit (as defined in subparagraph 
                (D)) on substantially all medical and surgical benefits 
                in any category of items or services (specified in 
                subparagraph (C)), the plan may not impose any 
                treatment limit on mental health and substance-related 
                disorder benefits that are classified in the same 
                category of items or services.
                  ``(B) Treatment limit.--If the plan includes a 
                treatment limit on substantially all medical and 
                surgical benefits in any category of items or services, 
                the plan may not impose such a treatment limit on 
                mental health and substance-related disorder benefits 
                for items and services within such category that are 
                more restrictive than the predominant treatment limit 
                that is applicable to medical and surgical benefits for 
                items and services within such category.
                  ``(C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this paragraph 
                and paragraph (4), there shall be the following four 
                categories of items and services for benefits, whether 
                medical and surgical benefits or mental health and 
                substance-related disorder benefits, and all medical 
                and surgical benefits and all mental health and 
                substance related benefits shall be classified into one 
                of the following categories:
                          ``(i) Inpatient, in-network.--Items and 
                        services furnished on an inpatient basis and 
                        within a network of providers established or 
                        recognized under such plan or coverage.
                          ``(ii) Inpatient, out-of-network.--Items and 
                        services furnished on an inpatient basis and 
                        outside any network of providers established or 
                        recognized under such plan or coverage.
                          ``(iii) Outpatient, in-network.--Items and 
                        services furnished on an outpatient basis and 
                        within a network of providers established or 
                        recognized under such plan or coverage.
                          ``(iv) Outpatient, out-of-network.--Items and 
                        services furnished on an outpatient basis and 
                        outside any network of providers established or 
                        recognized under such plan or coverage.
                  ``(D) Treatment limit defined.--For purposes of this 
                paragraph, the term `treatment limit' means, with 
                respect to a plan, limitation on the frequency of 
                treatment, number of visits or days of coverage, or 
                other similar limit on the duration or scope of 
                treatment under the plan.
                  ``(E) Predominance.--For purposes of this subsection, 
                a treatment limit or financial requirement with respect 
                to a category of items and services is considered to be 
                predominant if it is the most common or frequent of 
                such type of limit or requirement with respect to such 
                category of items and services.
          ``(4) Beneficiary financial requirements.--
                  ``(A) No beneficiary financial requirement.--If the 
                plan does not include a beneficiary financial 
                requirement (as defined in subparagraph (C)) on 
                substantially all medical and surgical benefits within 
                a category of items and services (specified in 
                paragraph (3)(C)), the plan may not impose such a 
                beneficiary financial requirement on mental health and 
                substance-related disorder benefits for items and 
                services within such category.
                  ``(B) Beneficiary financial requirement.--
                          ``(i) Treatment of deductibles, out-of-pocket 
                        limits, and similar financial requirements.--If 
                        the plan or coverage includes a deductible, a 
                        limitation on out-of-pocket expenses, or 
                        similar beneficiary financial requirement that 
                        does not apply separately to individual items 
                        and services on substantially all medical and 
                        surgical benefits within a category of items 
                        and services, the plan or coverage shall apply 
                        such requirement (or, if there is more than one 
                        such requirement for such category of items and 
                        services, the predominant requirement for such 
                        category) both to medical and surgical benefits 
                        within such category and to mental health and 
                        substance-related disorder benefits within such 
                        category and shall not distinguish in the 
                        application of such requirement between such 
                        medical and surgical benefits and such mental 
                        health and substance-related disorder benefits.
                          ``(ii) Other financial requirements.--If the 
                        plan includes a beneficiary financial 
                        requirement not described in clause (i) on 
                        substantially all medical and surgical benefits 
                        within a category of items and services, the 
                        plan may not impose such financial requirement 
                        on mental health and substance-related disorder 
                        benefits for items and services within such 
                        category in a way that is more costly to the 
                        participant or beneficiary than the predominant 
                        beneficiary financial requirement applicable to 
                        medical and surgical benefits for items and 
                        services within such category.
                  ``(C) Beneficiary financial requirement defined.--For 
                purposes of this paragraph, the term `beneficiary 
                financial requirement' includes, with respect to a 
                plan, any deductible, coinsurance, co-payment, other 
                cost sharing, and limitation on the total amount that 
                may be paid by a participant or beneficiary with 
                respect to benefits under the plan, but does not 
                include the application of any aggregate lifetime limit 
                or annual limit.''; and
          (2) in subsection (b)--
                  (A) by striking ``construed--'' and all that follows 
                through ``(1) as requiring'' and inserting ``construed 
                as requiring'';
                  (B) by striking ``; or'' and inserting a period; and
                  (C) by striking paragraph (2).
  (b) Expansion to Substance-Related Disorder Benefits and Revision of 
Definition.--Such section is further amended--
          (1) by striking ``mental health benefits'' and inserting 
        ``mental health and substance-related disorder benefits'' each 
        place it appears; and
          (2) in paragraph (4) of subsection (e)--
                  (A) by striking ``Mental health benefits'' in the 
                heading and inserting ``Mental health and substance-
                related disorder benefits'';
                  (B) by striking ``benefits with respect to mental 
                health services'' and inserting ``benefits with respect 
                to services for mental health conditions or substance-
                related disorders''; and
                  (C) by striking ``, but does not include benefits 
                with respect to treatment of substances abuse or 
                chemical dependency''.
  (c) Availability of Plan Information About Criteria for Medical 
Necessity.--Subsection (a) of such section, as amended by subsection 
(a)(1), is further amended by adding at the end the following new 
paragraph:
          ``(5) Availability of plan information.--The criteria for 
        medical necessity determinations made under the plan with 
        respect to mental health and substance-related disorder 
        benefits shall be made available by the plan administrator to 
        any current or potential participant, beneficiary, or 
        contracting provider upon request. The reason for any denial 
        under the plan of reimbursement or payment for services with 
        respect to mental health and substance-related disorder 
        benefits in the case of any participant or beneficiary shall, 
        upon request, be made available by the plan administrator to 
        the participant or beneficiary.''.
  (d) Minimum Benefit Requirements.--Subsection (a) of such section is 
further amended by adding at the end the following new paragraph:
          ``(6) Minimum scope of coverage and equity in out-of-network 
        benefits.--
                  ``(A) Minimum scope of mental health and substance-
                related disorder benefits.--In the case of a group 
                health plan (or health insurance coverage offered in 
                connection with such a plan) that provides any mental 
                health and substance-related disorder benefits, the 
                plan or coverage shall include benefits for any mental 
                health condition or substance-related disorder for 
                which benefits are provided under the benefit plan 
                option offered under chapter 89 of title 5, United 
                States Code, with the highest average enrollment as of 
                the beginning of the most recent year beginning on or 
                before the beginning of the plan year involved.
                  ``(B) Equity in coverage of out-of-network 
                benefits.--
                          ``(i) In general.--In the case of a plan that 
                        provides both medical and surgical benefits and 
                        mental health and substance-related disorder 
                        benefits, if medical and surgical benefits are 
                        provided for substantially all items and 
                        services in a category specified in clause (ii) 
                        furnished outside any network of providers 
                        established or recognized under such plan or 
                        coverage, the mental health and substance-
                        related disorder benefits shall also be 
                        provided for items and services in such 
                        category furnished outside any network of 
                        providers established or recognized under such 
                        plan in accordance with the requirements of 
                        this section.
                          ``(ii) Categories of items and services.--For 
                        purposes of clause (i), there shall be the 
                        following three categories of items and 
                        services for benefits, whether medical and 
                        surgical benefits or mental health and 
                        substance-related disorder benefits, and all 
                        medical and surgical benefits and all mental 
                        health and substance-related disorder benefits 
                        shall be classified into one of the following 
                        categories:
                                  ``(I) Emergency.--Items and services, 
                                whether furnished on an inpatient or 
                                outpatient basis, required for the 
                                treatment of an emergency medical 
                                condition (including an emergency 
                                condition relating to mental health and 
                                substance-related disorders).
                                  ``(II) Inpatient.--Items and services 
                                not described in subclause (I) 
                                furnished on an inpatient basis.
                                  ``(III) Outpatient.--Items and 
                                services not described in subclause (I) 
                                furnished on an outpatient basis.''.
  (e) Revision of Increased Cost Exemption.--Paragraph (2) of 
subsection (c) of such section is amended to read as follows:
          ``(2) Increased cost exemption.--
                  ``(A) In general.--With respect to a group health 
                plan, if the application of this section to such plan 
                results in an increase for the plan year involved of 
                the actual total costs of coverage with respect to 
                medical and surgical benefits and mental health and 
                substance-related disorder benefits under the plan (as 
                determined and certified under subparagraph (C)) by an 
                amount that exceeds the applicable percentage described 
                in subparagraph (B) of the actual total plan costs, the 
                provisions of this section shall not apply to such plan 
                during the following plan year, and such exemption 
                shall apply to the plan for 1 plan year.
                  ``(B) Applicable percentage.--With respect to a plan, 
                the applicable percentage described in this paragraph 
                shall be--
                          ``(i) 2 percent in the case of the first plan 
                        year which begins after the date of the 
                        enactment of the Paul Wellstone Mental Health 
                        and Addiction Equity Act of 2007; and
                          ``(ii) 1 percent in the case of each 
                        subsequent plan year.
                  ``(C) Determinations by actuaries.--Determinations as 
                to increases in actual costs under a plan for purposes 
                of this subsection shall be made by a qualified actuary 
                who is a member in good standing of the American 
                Academy of Actuaries. Such determinations shall be 
                certified by the actuary and be made available to the 
                general public.
                  ``(D) 6-month determinations.--If a group health plan 
                seeks an exemption under this paragraph, determinations 
                under subparagraph (A) shall be made after such plan 
                has complied with this section for the first 6 months 
                of the plan year involved.''.
  (f) Change in Exclusion for Smallest Employers.--Subsection (c)(1) of 
such section is amended to read as follows:
          ``(1) Small employer exemption.--
                  ``(A) In general.--This section shall not apply to 
                any group health plan for any plan year of a small 
                employer.
                  ``(B) Small employer.--For purposes of subparagraph 
                (A), the term `small employer' means, with respect to a 
                calendar year and a plan year, an employer who employed 
                an average of at least 2 (or 1 in the case of an 
                employer residing in a State that permits small groups 
                to include a single individual) but not more than 50 
                employees on business days during the preceding 
                calendar year. For purposes of the preceding sentence, 
                all persons treated as a single employer under 
                subsection (b), (c), (m), or (o) of section 414 shall 
                be treated as 1 employer and rules similar to rules of 
                subparagraphs (B) and (C) of section 4980D(d)(2) shall 
                apply.''.
  (g) Elimination of Sunset Provision.--Such section is amended by 
striking subsection (f).
  (h) Conforming Amendments to Heading.--
          (1) In general.--The heading of such section is amended to 
        read as follows:

``SEC. 9812.''.

          (2) Clerical amendment.--The table of sections for subchapter 
        B of chapter 100 of the Internal Revenue Code of 1986 is 
        amended by striking the item relating to section 9812 and 
        inserting the following new item:

``Sec. 9812. Equity in mental health and substance-related disorder 
benefits.''.

  (i) Effective Date.--The amendments made by this section shall apply 
with respect to plan years beginning on or after January 1, 2008.

SEC. 5. STUDIES AND REPORTS.

  (a) Implementation of Act.--
          (1) GAO study.--The Comptroller General of the United States 
        shall conduct a study that evaluates the effect of the 
        implementation of the amendments made by this Act on--
                  (A) the cost of health insurance coverage;
                  (B) access to health insurance coverage (including 
                the availability of in-network providers);
                  (C) the quality of health care;
                  (D) Medicare, Medicaid, and State and local mental 
                health and substance abuse treatment spending;
                  (E) the number of individuals with private insurance 
                who received publicly funded health care for mental 
                health and substance-related disorders;
                  (F) spending on public services, such as the criminal 
                justice system, special education, and income 
                assistance programs;
                  (G) the use of medical management of mental health 
                and substance-related disorder benefits and medical 
                necessity determinations by group health plans (and 
                health insurance issuers offering health insurance 
                coverage in connection with such plans) and timely 
                access by participants and beneficiaries to clinically-
                indicated care for mental health and substance-use 
                disorders; and
                  (H) other matters as determined appropriate by the 
                Comptroller General.
          (2) Report.--Not later than 2 years after the date of 
        enactment of this Act, the Comptroller General shall prepare 
        and submit to the appropriate committees of the Congress a 
        report containing the results of the study conducted under 
        paragraph (1).
  (b) GAO Report on Uniform Patient Placement Criteria.--Not later than 
18 months after the date of the enactment of this Act, the Comptroller 
General shall submit to the appropriate committees of each House of the 
Congress a report on availability of uniform patient placement criteria 
for mental health and substance-related disorders that could be used by 
group health plans and health insurance issuers to guide determinations 
of medical necessity and the extent to which health plans utilize such 
criteria. If such criteria do not exist, the report shall include 
recommendations on a process for developing such criteria.
  (c) DOL Biannual Report on Obstacles in Obtaining Coverage.--Every 
two years, the Secretary of Labor, in consultation with the Secretaries 
of Health and Human Services and the Treasury, shall submit to the 
appropriate committees of each House of the Congress a report on 
obstacles that individuals face in obtaining mental health and 
substance-related disorder care under their health plans.

                               I. Purpose

    Millions of Americans suffer from mental illness however 
obstacles within our health care system prevent many from 
getting the care they desperately need. The Paul Wellstone 
Mental Health and Addiction Equity Act (H.R. 1424) will expand 
the Mental Health Parity Act of 1996 \1\ to ensure that mental 
illnesses are covered under similar terms as physical illnesses 
for the millions of Americans who currently receive health care 
through their employers.
---------------------------------------------------------------------------
    \1\ P.L 104-204.
---------------------------------------------------------------------------
    Mental disorders are the leading cause of disability in the 
U.S. for individuals ages 15-44. \2\ However, private health 
insurers and employers generally provide less coverage for 
mental illnesses than for other medical and surgical benefits 
through the use of plan design features. H.R. 1424 seeks to 
increase access to mental health treatment by prohibiting group 
health plans (or health insurance coverage offered in 
connection with a group health plan) from imposing financial 
requirements (including deductibles, co payments, coinsurance, 
out-of-pocket expenses, and annual lifetime limits) or 
treatment limitations (including limitations on the number of 
visits, days of coverage, frequency of treatment, or other 
similar limits on the scope and duration of treatment) on 
mental health benefits that are more restrictive than those 
restrictions applied to medical and surgical benefits.
---------------------------------------------------------------------------
    \2\ The World Health Organization. The World Health Report 2004: 
Changing History; Annex Table 3: Burden of disease in Disability-
Adjusted-Life-Years (DALY) by cause, sex, and mortality stratum in WHO 
regions, estimates for 2002. Geneva (2004).
---------------------------------------------------------------------------

    II. Committee Action Including Legislative History and Votes in 
                               Committee


                       102ND CONGRESS (1991-1992)

    On May 12, 1992 during the 102nd Congress Senators Pete 
Domenici and John Danforth first introduced mental health 
parity legislation, Equitable Health Care for Severe Mental 
Illnesses Act of 1992, S. 2696. The legislation garnered 24 
bipartisan co-sponsors and was referred to the Committee on 
Labor and Human Resources. S. 2696 prohibited discrimination in 
the healthcare system based on an individual's severe mental 
illness, and stated health care coverage. No action was taken 
on S. 2696.
    The Senate Appropriations Committee included language in 
its Committee report \3\ to accompany the FY1993 Labor-HHS 
appropriations bill that requested the National Advisory Mental 
Health Council prepare a report on the cost of mental health 
parity.
---------------------------------------------------------------------------
    \3\ S. Rept. 102-397 at 96.
---------------------------------------------------------------------------

                       103RD CONGRESS (1993-1994)

    Congress considered mental health parity during the debate 
on the Clinton Administration's health care reform proposal in 
the 103rd Congress. The Health Security Act (introduced as H.R. 
3600 and S. 1757 respectively) included limited coverage of 
mental illness as part of its initial benefit package, however 
both bills provided for a phase-in of full parity by January 1, 
2001. The Health Security Act was deliberated in the House \4\ 
and Senate \5\ Committees of jurisdiction however no further 
action was taken on either bill.
---------------------------------------------------------------------------
    \4\ H.R. 3600 was referred to the: House Ways and Means Committee, 
Subcommittee on Select Revenue Measures, Subcommittee on Health, 
Subcommittee on Social Security; Armed Services Committee, Subcommittee 
on Military Forces and Personnel; Education and Labor Committee, 
Subcommittee on Labor Standards, Occupational Health and Safety, 
Subcommittee on Postsecondary Education and Training, Subcommittee on 
Elementary, Secondary, and Vocational Education, Subcommittee on Labor-
Management Relations, Subcommittee on Human Resources, Subcommittee on 
Select Education and Civil Rights; Government Operations Committee, 
Subcommittee on Information, Justice, Transportation, and Agriculture, 
Subcommittee on Legislation and National Security, Subcommittee on 
Human Resources and Intergovernmental Relations; Energy and Commerce 
Committee, Subcommittee on Health and Environment, Subcommittee on 
Commerce, Consumer Protection, and Competitiveness; Natural Resources 
Committee, Subcommittee on Native American Affairs; Judiciary 
Committee, Subcommittee on Economic and Commercial Law; Post Office and 
Civil Service Committee; Rules Committee; Veterans' Affairs Committee, 
Subcommittee on Hospitals and Health Care.
    \5\ On April 26, 1994, the Senate Finance Committee held a hearing 
on S. 1757.
---------------------------------------------------------------------------

                       104TH CONGRESS (1995-1996)

    On January 31, 1995 Senators Domenici and Wellstone re-
introduced the Equitable Health Care for Severe Mental 
Illnesses Act, S. 298 which sought to provide full mental 
health parity. The legislation had 7 co-sponsors and was 
similar to language approved by the Senate on April 18, 1996 as 
an amendment to S. 1028, the Health Insurance Reform Act. This 
amendment was later dropped in conference. A partial parity 
amendment offered by Senators Domenici and Wellstone was also 
rejected by the conferees as part of the Health Insurance 
Portability and Accountability Act (HIPAA). \6\
---------------------------------------------------------------------------
    \6\ P.L. 104-191.
---------------------------------------------------------------------------
    On August 2, 1996, Senators Pete Domenici and Paul 
Wellstone introduced S. 2031, the Mental Health Parity Act 
(MHPA). The bill had 16 bipartisan co-sponsors and was referred 
to the Committee on Labor and Human Resources. MHPA required 
parity for annual and lifetime dollar amounts; included an 
exemption for employers with 25 or fewer employees; and applied 
the parity provisions only to those group health plans that 
provided mental health coverage.
    Representative Marge Roukema introduced the House version 
of the Mental Health Parity Act of 1996, H.R. 4058 on September 
11, 1996. The MHPA garnered 22 bipartisan co-sponsors and was 
referred to the Committee on Commerce, Subcommittee on Health 
and Environment; the Committee on Economic and Educational 
Opportunities, Subcommittee on Employer-Employee Relations; and 
the Committee on Government Reform and Oversight, Subcommittee 
on Civil Service.
    MHPA was offered as an amendment to the FY 1997 VA-HUD 
appropriations bill, H.R. 3666. On September 5, 1996, the 
Senate approved the Domenici-Wellstone amendment, as amended 
\7\ by an 82-15 vote. On September 11, 1996, the House voted 
392-17 to adopt a motion to instruct conferees on H.R. 3666 and 
among other things, to agree to the Senate mental health parity 
provisions. The Domenici-Wellstone amendment was agreed to in 
conference and MHPA became Title VII of the FY1997 VA-HUD 
appropriations bill, which was signed into law on September 26, 
1996. \8\
---------------------------------------------------------------------------
    \7\ By voice vote, the Senate approved a second degree amendment 
offered by Senator Gramm which exempted health plans from the MHPA 
parity requirement if the cost of compliance exceeded the original cost 
of coverage by 1 percent.
    \8\ P.L 104-204. See also, Ramya Sundararaman, ``The Mental Health 
Parity Act: A Legislative History,'' CRS Report for Congress, May 18, 
2007 at 5.
---------------------------------------------------------------------------

                       105TH CONGRESS (1997-1998)

    During Congress' debate on the Balanced Budget Act of 1997 
during the 105th Congress, Senators Domenici and Wellstone 
successfully attached an amendment to the State Children's 
Health Insurance Plan (SCHIP) which required plans offering 
mental health benefits to provide full-parity coverage. 
Although the language was later deleted in conference, the 
conferees did accept language that required all SCHIP plans and 
Medicaid managed care plans to meet the requirements of the 
MHPA. The MHPA provisions were also added to the Internal 
Revenue Code (IRC) through the Taxpayer Relief Act of 1997. \9\
---------------------------------------------------------------------------
    \9\ P.L. 105-34, Section 1531(a)(4), codified at 26 U.S.C. 9812.
---------------------------------------------------------------------------
    On March 26, 1998, Representative Marge Roukema introduced 
the Mental Health and Substance Abuse Parity Amendments of 
1998, H.R. 3568. The bill had 26 Democratic and Republican co-
sponsors and was referred to the: Commerce Committee, 
Subcommittee on Health and the Environment; Education and the 
Workforce Committee, Subcommittee on Employer-Employee 
Relations; Ways and Means Committee, Subcommittee on Health. No 
further action was taken on H.R. 3568.

                       106TH CONGRESS (1999-2000)

    On April 14, 1999, the Mental Health Equitable Treatment 
Act, S. 796 was introduced by Senators Pete Domenici and Paul 
Wellstone. S. 796 had 28 Democratic and Republican co-sponsors 
and was referred to the Committee on Health, Education, Labor, 
and Pensions.
    On May 18, 2000, the Senate HELP committee held a hearing 
entitled Examining Mental Health Parity Issues, including S. 
796, To Provide for Full Parity with Respect to Health 
Insurance Coverage for Certain Severe Biologically-based Mental 
Illnesses and to Prohibit Limits on the Number of Mental 
Illness-Related Hospital Days and Outpatient Visits that are 
Covered for All Mental Illnesses. The hearing consisted of 
three panels. The witnesses for the first panel included: 
Senator Pete V. Domenici and Senator Paul D. Wellstone. The 
second panel included: Kathryn G. Allen, Associate Director of 
Health Financing and Public Health Issues of the U.S. General 
Accounting Office and Dr. Steven E. Hyman, Director of the 
National Institute of Mental Health of the National Institute 
of Health. The third panel witnesses included: Ken Libertoff, 
Director of the Vermont Association for Mental Health; Dr. 
Kenneth Duckworth, Deputy Commissioner of the Massachusetts 
Department of Mental Health; Tara Wooldridge, Manager of the 
Employee Assistance Program of Delta Airlines; and Dean Rosen, 
senior Vice President of Policy and General Counsel of the 
Health Insurance Association of America.
    Representative Marge Roukema re-introduced the Mental 
Health and Substance Abuse Parity Amendments of 1999, H.R. 1515 
on April 21, 1999. The bill which had 114 Democratic and 
Republican co-sponsors was referred to the: Commerce Committee, 
Subcommittee on Health and the Environment; Education and the 
Workforce Committee, Subcommittee on Employer-Employee 
Relations; Ways and Means Committee, Subcommittee on Health. No 
further action was taken on H.R. 1515.

                       107TH CONGRESS (2001-2002)

    On March 15, 2001, the Mental Health Equitable Treatment 
Act of 2001 was introduced by Senators Pete Domenici and Paul 
Wellstone. The bill garnered 66 Democratic and Republican 
cosponsors and was referred to the HELP Committee.

Senate consideration of mental health parity legislation

    On July 11, 2001 the Senate HELP Committee held a hearing 
entitled Achieving Parity for Mental Health Treatment. The 
witnesses included: Senator Paul Wellstone; Senator Pete 
Domenici; Edward Flynn, Associate Director for Retirement and 
Insurance of the Office of Personnel Management; Lisa Cohen; 
Dr. Henry Harbin, Chairman of the Board and Chief Executive 
Officer of Magellan Health Services; and Dr. Darrel A. Regier, 
Executive Director of the American Psychiatric Institute for 
Research and Education.
    On August 1, 2001, the Committee unanimously approved a 
substitute version of S. 543. On October 30, 2001, Senators 
Domenici and Wellstone offered S. 543, as reported, as an 
Senate Amendment 2020 to FY 2002 Labor-HHS appropriations bill, 
H.R. 3061, which the Senate approved by voice vote. The House 
version of H.R. 3061 did not include any parity language and on 
December 18, 2001, the House conferees rejected Representative 
Kennedy's motion to accept the Domenici-Wellstone mental health 
parity amendment. The conference did approve Representative 
Duke Cunningham's motion to include language in the bill 
reauthorizing the MHPA through December 31, 2002.

Consideration of mental health parity legislation in the House of 
        Representatives

    On January 3, 2002, Representative Marge Roukema re-
introduced the Mental Health and Substance Abuse Parity 
Amendments, H.R. 162. The bill was cosponsored by 202 
Democratic and Republican members. H.R. 162 was referred to the 
Energy and Commerce Committee, Subcommittee on Health; the 
Education and the Workforce Committee, Subcommittee on 
Employer-Employee Relations; and the Ways and Means Committee, 
Subcommittee on Health.
            Committee consideration of mental health parity
    On March 13, 2002 the Subcommittee on Employer-Employee 
Relations of the Committee on Education and the Workforce held 
a hearing entitled, Assessing Mental Health Parity: 
Implications for Patients and Employers. The witnesses before 
this hearing included: Representative Marge Roukema; 
Representative Patrick Kennedy; Representative Lynn Rivers; Kay 
Nystul, Behavioral Health Nurse and Case Management Coordinator 
of Wausau Benefits; Lee Dixon, Group Director of Health Policy 
Tracking Service of the National Conference of State 
Legislatures; Dr. Henry Harbin, Chairman of the Board of 
Magellan Health Services Inc.; and Jane Greenman, Vice 
President of Human Resources and Communications and Deputy 
General Counsel of Honeywell International.
    On July 23, 2002, the Subcommittee on Health of the 
Committee on Energy and Commerce held a hearing entitled 
Insurance Coverage of Mental Health Benefits. The witnesses 
were Charles M. Cutler, Chief Medical Officer of the American 
Association of Health Plans; James T. Hackett, Chairman, 
President, and Chief Executive Officer of Ocean Energy Inc.; 
Kay Nystul, Psychiatric Registered Nurse and Certified Case 
Manager of Wausau Benefits Inc.; Darrel A. Regier, Director of 
the Office of Research or the American Psychiatric Association; 
and Neil E. Trautwein, Director of Employment Policy of the 
National Association of Manufacturers.
    Despite holding hearings, no further action was taken on 
the mental health parity legislation introduced in the House of 
Representatives. However, in two separate legislative actions, 
Congress reauthorized MHPA through December 31, 2003. \10\
---------------------------------------------------------------------------
    \10\ Section 610 of the Job Creation and Worker Assistance Act of 
2002 (H.R. 3090, P.L. 107-147) amended MHPA provisions in the IRC, and 
the Mental Health Parity Reauthorization Act of 2002 (H.R. 5716, P.L. 
107-313) reauthorized the MHPA provisions in ERISA and the PHSA. H.R. 
5716 was introduced by Representative John Boehner on November 13, 2002 
and approved without objection by the House on November 15, 2002. On 
the same day, the Senate received and passed the bill by unanimous 
consent.
---------------------------------------------------------------------------

                       108TH CONGRESS (2003-2004)

    On January 7, 2003 Senator Thomas Daschle introduced the 
Health Care Coverage Expansion and Quality Improvement Act of 
2003, S. 10. S. 10 required health plans treat mental illness 
in a nondiscriminatory and equitable manner by covering 
essential mental health treatment. The bill had 22 co-sponsors 
and was referred to the Senate Finance Committee. No further 
action was taken on the bill.
    On February 27, 2003, Representatives Patrick Kennedy and 
Jim Ramstad introduced the Senator Paul Wellstone Mental Health 
and Equitable Treatment Act of 2003, H.R. 953. The bill 
garnered 248 bipartisan co-sponsors and was referred to the 
Energy and Commerce Committee, Subcommittee on Health; the 
Education and the Workforce Committee, Subcommittee on 
Employer-Employee Relations. There was no further consideration 
of the bill in the house.
    Also on February 27, 2003, Senators Pete Domenici and 
Edward Kennedy introduced the Senate version of the Senator 
Paul Wellstone Mental Health Equitable Treatment Act of 2003, 
S. 486. The Act had 69 bipartisan co-sponsors and was referred 
to the Committee on Health, Education, Labor, and Pensions. No 
further action was taken on this legislation.
    On November 4, 2003 the Senate HELP Committee, Subcommittee 
on Substance Abuse and Mental Health held a hearing on 
``Recommendations to Improve Mental Health Care in America: 
Report from the President's new Freedom Commission on Mental 
Health.'' The witnesses included: Stephen W. Mayberg, 
Commissioner of The President's New Freedom Commission on 
Mental Health; Charles G. Curie, Administrator of the Substance 
Abuse and Mental Services Administration on behalf of the 
Campaign for Mental Health Reform; Dr. Paul S. Appelbaum, 
Professor of Psychiatry at the University of Massachusetts 
Medical School; Michael M. Faenza, President and Chief 
Executive Officer, national Mental Health Association on behalf 
of the Campaign for Mental Health Reform; Carlos Brandenberg, 
Administrator of Nevada Division of Mental Health and 
Developmental Services; and Ann Buchanan.
    On November 17, 2003, Senator Judd Gregg introduced the 
Mental Health Parity Reauthorization Act of 2003, S. 1875, with 
Senator Edward Kennedy. However, on November 21, 2003, a new 
version of the Mental Health Parity Reauthorization Act of 
2003, S. 1929, was introduced by Senators Gregg and Kennedy. S. 
1929 was approved in the Senate by unanimous consent on the 
same day. On December 8, 2003 it was passed by the House by 
unanimous consent and became Public Law 108-197 on December 19, 
2003.

                       109TH CONGRESS (2005-2006)

    On March 17, 2005, Representatives Patrick Kennedy and Jim 
Ramstad reintroduced the Paul Wellstone Mental Health Equitable 
Treatment Act, H.R. 1402. The bill had 231 co-sponsors and was 
referred to the Committee on Education and the Workforce, 
Subcommittee on Employer-Employee Relations; and the Committee 
on Energy and Commerce, Subcommittee on Health. On September 
28, 2006, Representative Patrick Kennedy filed a discharge 
petition to request the bill be released from Committee and 
brought to the floor for consideration. The discharge petition 
gathered only 175 of the 218 member signature needed for 
discharge and subsequently failed.
    No further action was taken in either the House of 
Representatives or the Senate however Congress extended MHPA 
through the end of 2007. \11\
---------------------------------------------------------------------------
    \11\ P.L. 109-151. In the first session of the 109th Congress, the 
Employee Retirement Preservation Act, H.R. 4579 (P.L. 109-151), 
extended the provisions requiring mental health parity in ERISA, the 
PHS Act, and the IRC through 2006. H.R. 4579 passed the House by voice 
vote on December 17, 2005, and passed the Senate by unanimous consent 
on December 22, 2005. In the second session, Section 115 of the Tax 
Relief and Health Care Act of 2006, H.R. 6111 (P.L. 109-432) extended 
MHPA provisions in all three statutes through 2007.
---------------------------------------------------------------------------

                         110TH CONGRESS (2007)

    The Mental Health Parity Act of 2007, S. 558 was first 
introduced by Senators Pete V. Domenici and Edward Kennedy on 
February 12, 2007 with 53 bipartisan co-sponsors. It was 
referred to the Senate HELP Committee and subsequently to the 
Subcommittee on Health.
    In the House of Representatives, the Paul Wellstone Mental 
Health and Addiction Equity Act of 2007 was first introduced by 
Representatives Patrick Kennedy and Jim Ramstad as H.R. 1367 on 
March 7, 2007 with 255 co-sponsors. Two days later, on March 9, 
2007 a modified version of the bill was introduced and has 
garnered 268 Democratic and Republican co-sponsors. H.R. 1424 
was referred to the Committee on Energy and Commerce, 
Subcommittee on Health; the Committee on Education and Labor, 
Subcommittee on Health, Employment, Labor, and Pensions; and 
the Committee on Ways and Means, Subcommittee on Health.

Senate action on mental health parity legislation

    On February 14, 2007, the HELP Committee held an executive 
session to markup S. 558. During the markup Senator Harkin 
offered an amendment by Senator Dodd, which included a 
technical change to clarify provisions relating to a GAO study. 
This amendment required GAO to examine and report on the impact 
of out-of-network coverage for mental health benefits. The 
amendment was adopted by unanimous consent and the bill was 
favorably reported to the full Senate by a vote of 18-3. On 
March 27, 2007, the Committee met again and reported an amended 
version of S. 558 with an amendment in the nature of a 
substitute offered by Chairman Kennedy.

Hearings on mental health parity in the House of Representatives

            Ways and Means Committee, Health Subcommittee
    On March 27, 2007, the Subcommittee on Health of the Ways 
and Means Committee held a three panel hearing entitled Mental 
Health and Substance Abuse Parity. Witnesses testifying on 
panel one included: Representatives Patrick Kennedy, and Jim 
Ramstad; Witnesses on panel two included: David L. Shern, 
Ph.D., President and CEO, Mental Health America, Kathryne L. 
Westin, M.A., L.P., Eating Disorders Coalition for Research, 
Policy and Action, and Michael Quirk, Ph.D., Director, 
Behavioral Health Service, Group Health Cooperative. Panel 
three included: Eric Goplerud, Ph.D., Director, Ensuring 
Solutions to Alcohol Problems, George Washington University; 
Ronald W. Manderscheid, Ph.D., Director of Mental Health and 
Substance Use Programs Constella Group LLC; and Henry T. 
Harbin, M.D.
            Energy and Commerce Committee, Subcommittee on Health
    On June 15, 2007, the Subcommittee on Health of the 
Committee on Energy and Commerce held a hearing entitled H.R. 
1424, the Paul Wellstone Mental Health and Addiction Equity Act 
of 2007. The witnesses included: Representative Patrick 
Kennedy; Representative Jim Ramstad; James Purcell, President 
and Chief Executive Officer of Blue Cross & Blue Shield of 
Rhode Island; Marley Prunty-Lara; Howard Goldman, Professor of 
Psychiatry of the University of Maryland; Edwina Rogers, Vice 
President of Health Policy for the ERISA Industry Committee; 
and James Klein, President of the American Benefits Council.
            Education and Labor Committee, HELP Subcommittee
    On July 10, 2007, the Subcommittee on Health, Employment, 
Labor, and Pensions of the Committee on Education and Labor 
held a two-panel hearing entitled the Paul Wellstone Mental 
Health and Addiction Equity Act of 2007 (H.R. 1424). The first 
panel included: Representative Patrick Kennedy and 
Representative Jim Ramstad. The second panel included: Rosalynn 
Carter, former First Lady and chairwoman of the Carter Center's 
Mental Health Task Force; David Wellstone, son of the late 
Senator Paul Wellstone and co-founder of Wellstone Action; Sean 
Dilweg, Insurance Commissioner for the State of Wisconsin; Amy 
Smith, Vice President of Mental Health Association of Colorado; 
Steve Melek, actuary for Milliman Inc.; Neil Trautwein, 
Employee Benefits Policy Counsel for the National Retail 
Federation; and Jon Breyfogle, executive principal for the 
Groom Law Group.

Education and Labor Committee full committee mark-up of the Paul 
        Wellstone Mental Health and Addiction Equity Act of 2007

    On July 18, 2007, the Committee on Education and Labor met 
to markup H.R. 1424, the Paul Wellstone Mental Health and 
Addiction Equity Act of 2007. The Committee adopted by voice 
vote an amendment in the nature of a substitute offered by 
Chairman Miller and reported the bill favorably as amended by a 
vote of 33-9 to the House of Representatives.
    The Miller amendment incorporates the provisions of H.R. 
1424 with the following modifications:
     Adds emergency care to the list of categories of 
items and services that are subject to the treatment limit 
parity requirements (other categories are inpatient in-network, 
inpatient out-of-network, outpatient in-network, and outpatient 
out-of-network).
     Makes clear that the requirement that group health 
plans make available to patients and providers their criteria 
for medical necessity determinations and reasons for any denial 
under the plan be provided in accordance with Department of 
Labor regulations.
     Adds a provision that group health plans may 
utilize industry and provider recognized benefit management 
practices for medical, surgical, mental health and substance 
related disorder benefits.
     Conforms preemption of state laws to existing 
HIPAA standards with specific protection of state laws relating 
to health insurance issuers including state laws providing for 
external review, requiring minimum benefits, covering employers 
with fewer than 50 employees, or solely related to health 
insurance issuers.
     Makes clear that collectively bargained plans 
become subject to the Act upon the expiration of an existing 
collective bargaining agreement.
     Requires the Department of Labor to annually 
sample and conduct random audits of group health plans to 
ensure compliance with the Act.
     Requires the Department of Labor to assist 
individuals with any questions or problems under the Act and to 
coordinate with state consumer protection agencies.
    The Kline amendment in the nature of a substitute was 
defeated by a vote of 16-27. The amendment incorporated an 
amended version of S. 558, the Senate Mental Health Parity Act 
of 2007.
    The Kline amendment differed from H.R. 1424 in at least two 
key areas. First, the Kline amendment would expressly permit 
every employer or health insurance issuer to establish its own 
definition of ``mental health benefits.'' In contrast, H.R. 
1424 seeks to provide private sector employees the same mental 
health coverage provided to federal employees by requiring 
group health plans to utilize the definition of mental health 
benefits under by the federal employee health plan with the 
largest average enrollment of federal employees.
    The Committee supported the need for a federal standard for 
covered mental health benefits because of the long history of 
employer and insurer denial of coverage for mental health 
illnesses. As described elsewhere in this report, employers and 
insurers, historically and currently, have not provided 
comparable coverage of mental illnesses as they have of 
physical illnesses. For example, employers and insurers 
generally do not list covered and non-covered physical 
illnesses, whereas such delineation of mental illnesses is 
commonplace.
    The Kline Substitute would have permitted employers to 
create millions of definitions of mental health benefits 
undermining the need for uniformity that employers claim to 
seek. Employers would be free to eviscerate the intent of the 
Act simply by defining mental health benefits to exclude 
benefits the employer or insurer does not want to cover. This 
would allow insurance companies and group health plans to 
codify discrimination by diagnosis allowing plans to use 
arbitrary, non-scientific criteria in determining what mental 
illnesses and addiction disorders to cover.
    The minority may argue that creation of a federal 
definition of mental health benefits exceeds ``technical 
parity'' since federal law does not define medical or surgical 
benefits. But, there is no data or allegations that employers 
or insurers narrowly define medical benefits, whereas there is 
ample data that employers and insurers have used narrow mental 
health definitions to evade coverage. Without a definition of 
covered mental health benefits, mental health parity 
legislation would continue to include loopholes that make 
parity an illusory promise.
    The minority also expresses concern that defining mental 
health benefits would create a ``new mandate'' and could 
increase employer costs and reduce employer health benefit 
coverage. Again, the minority is ignoring the history and 
evidence on this matter. Both federal and state law 
traditionally and repeatedly set minimum standards for the 
provision of health care benefits when public policy concerns 
have warranted such. Experience has demonstrated that such 
minimum standards do not lead to reduced coverage or increased 
costs. Specifically with respect to mental health parity 
legislation, neither the federal employee, state nor private 
sector experience bears out the minority's fears. As noted 
below, the Congressional Budget Office (CBO), U.S. Government 
Accountability Office (GAO), and numerous other actuarial 
analyses have documented that expanded mental health coverage 
does not significantly increase costs or reduce coverage.
    Second, the Kline Substitute differed from H.R. 1424 in its 
preemption of state health care laws. The Majority and minority 
face fundamental differences on the issue of preemption. 
Historically, states have had the primary responsibility for 
protecting the public health of their citizens. States have 
regulated the provision of insurance, including health 
insurance, for hundreds of years. In fact, even into current 
times, the insurance community has preferred state regulation 
over federal regulation of insurance practices.
    Congress' active involvement with national health care 
primarily began with the enactment of Medicare and Medicaid in 
1965 and Congress has struggled with the need for additional 
national reforms ever since. Since 1996, a key principle for 
Congress has been to incrementally reform private health 
coverage by establishing a federal floor of protections for 
workers and their families. Through a federal standard that is 
a floor, not a ceiling, Congress has recognized that state 
policymakers may determine that to protect patients in state-
regulated plans, a stronger set of standards are necessary than 
those provided in federal law. In fact, many states now require 
insurance companies to cover mental health services. This bill 
recognizes and encourages states to enact stronger consumer 
protections.
    In addition to benefit requirements, many states have set 
standards to improve the quality of coverage to ensure that 
health insurance actually works for people who need it, while 
establishing rules to combat abusive practices by some in the 
health insurance industry. States have used a myriad of 
strategies to accomplish that, including patient protections 
and standards for medical management. Nothing in this bill is 
intended to in any way to affect those (or future) state 
efforts.
    Understandably, large employers who operate in multiple 
states prefer a single unified system--with one set of rules 
with which they must comply and treat their employees. But, 
large employers who once accepted the need for some federal 
minimum health care standards, now generally want only minimal 
rules at both the federal and state level. The employer 
community has used the Employee Retirement Income Security Act 
(ERISA) \12\ ERISA as a shield against both federal and state 
health care protections. Only the most sophisticated legal and 
health care experts know that ERISA contains few health care 
standards. ERISA is primarily a pension law that establishes 
detailed standards for information, coverage, and funding of 
pension promises. While ERISA applies to all employer provided 
employee benefits, it does not generally contain minimum health 
care standards. Enacted in 1974, Congress expected that it 
would shortly adopt comprehensive federal standards. Congress 
has attempted to enact national health care standards on 
several occasions, but without success.
---------------------------------------------------------------------------
    \12\ P.L. 93-406.
---------------------------------------------------------------------------
    As a result, the United States has not created a national 
system for providing health care to all citizens. Rather, it 
has a patchwork of federal and state and local laws providing a 
wide variety of health care requirements and protections for 
employers, insurers, and citizens. The large employers argue 
that only the federal government should set standards and 
preferably minimal ones. Congress' choice is either to adopt 
comprehensive federal standards, free the states to enact 
comprehensive state standards or to continue dual federal and 
state regulation.
    Further complicating the issue is the illogical treatment 
of ``insured'' versus ``self-insured'' plans. Under current 
judicial interpretation of ERISA, if an employer establishes a 
health plan and the employer is the insurer of the plan, then 
the states are generally preempted from regulating the health 
plan. However, if the employer contracts with a state licensed 
insurance company or other state sanctioned health care entity, 
then the state may directly regulate the behavior of the 
insurer or other entity, and indirectly affect the actions of 
the health plan. Despite the illogic of this regulatory scheme, 
in the absence of broader Congressional direction on 
comprehensive health care reform, H.R. 1424 continues this 
existing system of split federal versus state oversight of 
health plans and benefits.
    However, solely with respect to mental health parity laws, 
H.R. 1424 seeks to provide some improvement in the longstanding 
morass created by ERISA's preemption of state laws. Thousands 
of court cases and dozens of law review articles have argued 
over the correct intent and interpretation of ERISA preemption 
of state laws. On the whole, ERISA preemption has served to 
take away legal protections for workers and consumers. Although 
Congress' original intent had been strong federal standards 
over state standards, judicial interpretation of ERISA has 
created weak federal standards and minimal state protection. 
Congress' long debate over what was known as the Patient's Bill 
of Rights\13\ amply documented how ERISA preemption has harmed 
consumers and undermined long term health care reform efforts.
---------------------------------------------------------------------------
    \13\ The Patient's Bill of Rights Act of 2005, H.R. 2259 was 
introduced in the House on May 11, 2005 by Representative John Dingell. 
Senator Edward Kennedy introduced the Senate version of the bill, S. 
1012 on May 12, 2005.
---------------------------------------------------------------------------
    H.R. 1424 rejects the continuation of this unfair 
preemption scheme. The bill adopts the model created by the 
Health Insurance Portability and Accountability Act of 
1996.\14\ The bill generally would not preempt state laws that 
do not ``prevent the application'' of federal mental health 
parity standards. The bill also specifically enumerates types 
of laws that Congress does not intend to preempt. Those laws 
include state laws establishing, implementing or continuing 
consumer protections, benefits, methods of access to benefits, 
rights, external review programs, or remedies solely relating 
to health insurance issuers. The bill also specifically does 
not intend to preempt state laws containing benefit mandates, 
regulation of small employer group health plans or state laws 
solely related to health insurance issuers. Further, this bill 
would not relieve a company--licensed or registered under state 
law to perform utilization review--from its licensing or other 
applicable standards and obligations under state law. Unlike 
ERISA, HIPAA's preemption provisions have not been subject to 
excessive litigation and have provided certainty to consumers, 
employers and states.
---------------------------------------------------------------------------
    \14\ P.L. 104-191.
---------------------------------------------------------------------------
    Both the House and Senate passed versions of the Genetic 
Information Nondiscrimination Act, H.R. 493 used the HIPAA 
model to coordinate between federal and state regulatory 
policies.
    In contrast, the Kline Substitute provides exceptions to 
its general preemption that are ambiguous and likely would 
invite innumerable ERISA litigation challenges.\15\ The first 
exception seeks to clarify that portions of state law not 
preempted will continue to apply and that individual and small 
group coverage standards are not preempted. Yet, the language 
in Kline Substitute does not clearly ensure protection of 
existing individual and small group insurance market state 
laws. If the Kline Substitute were to become law, then states 
with one mental health coverage standard that applies to 
policies sold in the large group, small group and individual 
health insurance markets most likely can expect preemption 
challenges to their individual and small group mental health 
laws.\16\
---------------------------------------------------------------------------
    \15\ See, Mila Koffman, Letter to Speaker Nancy Pelosi ( June 15, 
2007). Mila Koffman is a nationally recognized expert on insurance 
regulation, unauthorized insurance and ERISA. She previously served as 
a federal regulator at the U.S. Department of Labor and as a special 
assistant to the Senior Health Care Advisor to President Bill Clinton.
    \16\ Id.
---------------------------------------------------------------------------
    In addition, the Kline Substitute would not preempt state 
coverage laws for ``specific items, benefits, or services.'' 
These terms are not defined and thus the ambiguity of this 
language makes it unclear as to what type of state law would 
qualify as requiring ``specific items, benefits, or services.'' 
Furthermore, it is unclear as to whether a qualified law 
coupled with ``parity requirements'' (e.g. requiring alcohol 
abuse treatment) would be eligible under this exception. Again, 
clarification would have to be determined through 
litigation.\17\
---------------------------------------------------------------------------
    \17\ Id.
---------------------------------------------------------------------------
    An example of how the Senate proposal would create 
ambiguity can be demonstrated by California's mental health 
parity law. California has a standard mental health parity law 
which applies generally to health insurance coverage. Since 
California does not apply a specific law to the individual and 
small group markets, there is no guarantee that courts will 
uphold the law under an ERISA preemption challenge. In 
addition, Connecticut's mental health coverage law has elements 
of ``parity'' and therefore may have to be litigated to 
determine which, if any, requirements would survive 
preemption.\18\
---------------------------------------------------------------------------
    \18\ Id.
---------------------------------------------------------------------------
    In addition to preempting stronger state parity laws and 
allowing insurance companies and group health plans to 
discriminate against an array of mental and substance abuse 
illnesses, the Kline Substitute does not provide any legal 
remedies for patients. Many Members of the Committee have long 
supported meaningful remedies for violations of the law and 
H.R. 1424 seeks to make clear that Congress never intended to 
preempt state insurance laws that provide legal protections to 
individuals covered by state regulated insurance products.

                        III. Summary of the Bill

    The Paul Wellstone Mental Health and Addiction Equity Act, 
H.R. 1424 amends the ERISA and the Public Health Service Act 
(PHSA) \19\ to prohibit employer group health plans offering 
mental health benefits from imposing mental health treatment 
limitations or financial requirements at a less comparable rate 
to the requirements and limitations they impose on medical or 
surgical benefits. The bill does not mandate group health plans 
to provide any mental health coverage; however, if the group 
health plan does offer mental health coverage then there must 
be equity between mental health coverage and all comparable 
medical and surgical benefits that the plan covers. H.R. 1424 
makes clear that equity in financial requirements, treatment 
limitations, and out of network coverage is essential to a 
strong federal mental health parity law. Furthermore, the plan 
must cover the same range of mental illnesses and addiction 
disorders covered by the Federal Employee Health Plan that most 
federal employees and Members of Congress use.\20\ As of July 
18, 2007, H.R. 1424 had 268 co-sponsors, 230 Democrats and 38 
Republicans.
---------------------------------------------------------------------------
    \19\ 42 U.S.C. Sec. 6A.
    \20\ Summary of H.R. 1424, available at: http://www.thomas.gov/cgi-
bin/bdquery/z?d110:h.r.01424.
---------------------------------------------------------------------------

                   IV. Statement and Committee Views

    The Committee on Education and Labor of the 110th Congress 
is committed to improving access to health care, including 
treatment for mental health and substance disorders. The Paul 
Wellstone Mental Health and Addiction Equity Act addresses the 
inequities that those with mental illness experience in their 
health care coverage. The bill would prohibit group health 
plans from imposing financial requirements or treatment 
limitations on the coverage of mental health conditions and 
substance abuse that are more limited than those available for 
medical and surgical benefits. The Act is a cost-effective way 
of promoting increased access to mental health care.
    To echo the words of former First Lady Rosalyn Carter, who 
testified before the Education and Labor Committee's Health, 
Employment, Labor, Pensions (HELP) Subcommittee:

    it is unconscionable in our country and morally 
unacceptable to treat 20 percent of our population (1 in every 
5 people in our country will experience a mental illness this 
year) as though they were not worthy of care . . . [t]hen we 
pay the price for this folly in homelessness, lives lost, 
families torn apart, loss of productivity.\21\
---------------------------------------------------------------------------
    \21\ The Paul Wellstone Mental Health and Addiction Equity Act of 
2007 (H.R. 1424), hearing before the Subcommittee on Health, 
Employment, Labor, & Pensions, 110th Cong., 1st Sess. (2007) (written 
testimony of Rosalyn Carter) [hereinafter Carter Testimony].
---------------------------------------------------------------------------

Mental Illness: An Overview

    An estimated 40 million American adults suffer from some 
type of mental illness each year, while 5.5 million or 6 
percent suffer from a severe mental illness such as 
schizophrenia or major depression.\22\ Approximately 1 in 17 
Americans suffer from a serious mental illness; about 12 
million children suffer from mental disorders such as autism, 
depression and hyperactivity; \23\ and every year, about 54 
million Americans suffer from clearly diagnosable mental or 
substance abuse disorders.\24\ Overall, approximately 26.2 
percent of Americans are afflicted with mental illness or 
substance abuse disorders; \25\ while 14.8 million Americans 
suffer from depression; and 2.4 million suffer from 
schizophrenic disorders.
---------------------------------------------------------------------------
    \22\ The Government Accounting Office (GAO). ``Mental Health Parity 
Act: Despite New Federal Standards, Mental Health Benefits Remain 
Limited,'' (May 2000) at 7.
    \23\ Colleen Barry et al., ``Design of Mental Health Benefits: 
Still Unequal After All These Years,'' Health Affairs, September/
October 2003.
    \24\ National Mental Health Association, ``Mental Illness in the 
Family,'' 2005.
    \25\ National Institutes of Mental Health, ``The Numbers Count: 
Mental Disorders in America,'' 2006.
---------------------------------------------------------------------------
    Mental health is essential to leading a healthy life and to 
the development and realization of a person's full 
potential.\26\ For those who suffer from mental illness, 
``mental disorders are treatable . . . there is generally not 
just one but a range of treatments of proven efficacy.'' \27\ 
Despite proven treatments, due to the social stigma and lack of 
understanding about the disease, mental illness often goes 
untreated. As a result, mental illness and substance-abuse 
disorders are leading causes of disability and premature 
mortality.\28\ As scientific knowledge about mental health has 
grown and analyses have proven a nominal economic impact on the 
consumer, the employer, and the insurance company with respect 
to mental health, coverage for mental illness continues to 
expand. Nevertheless, stigma still remains; the result is that 
many people in need of mental services are prevented from 
receiving proper care.
---------------------------------------------------------------------------
    \26\ Mental Health and Substance Abuse Parity, hearing before the 
House Committee on Ways and Means, Subcommittee on Health, 110th Cong., 
1st Sess. (2007) at 1 (written testimony of David L. Shern) 
[hereinafter Shern Testimony].
    \27\ U.S. Dep't of Health & Human Svrs., Mental Health: A Report of 
the Surgeon General 46, 179 (1999) hereinafter SGRMH].
    \28\ Id.
---------------------------------------------------------------------------
    The term mental illness refers collectively to all 
diagnosable mental disorders. Mental disorders are health 
conditions that are characterized by alterations in thinking, 
mood, or behavior associated with distress and/or impaired 
functioning.\29\
---------------------------------------------------------------------------
    \29\ Id.
---------------------------------------------------------------------------
    Social stigma about mental illness dates as far back as the 
17th Century.\30\ The stigmatization of mental illness is 
manifested by bias, distrust, stereotyping, fear, 
embarrassment, anger, and/or avoidance. It is this stigma that 
leads people to avoid living, socializing or working with, 
renting to, or employing people with mental disorders. Stigma 
also reduces an individual's access to resources and 
opportunities such as jobs and housing as well as leading to 
low self-esteem, isolation, and hopelessness.\31\
---------------------------------------------------------------------------
    \30\ Patrick Kennedy. ``Policy Essay: Why We Must End Insurance 
Discrimination Against Mental Health Care.'' Harvard Journal on 
Legislation Vol. 44, No. 2. (Summer 2004) available at: http://
www.law.harvard.edu/students/orgs/jol/vol41_2/kennedy.php. The French 
philosopher Rene Descartes' theory of dualism--the separation of mind 
and body--is seen as the non-scientific basis as to why people continue 
to believe having a mental illness is a personal failing, rather than a 
treatable disease. Descartes believed that while physicians had the 
ability to treat physical ailments, the mind, which implicated the 
spirit, could only be ``treated'' through religion.
    \31\ Id.
---------------------------------------------------------------------------
    The public attitude toward mental illness has been surveyed 
nationally since the 1950s.\32\ In the 1950s, many people 
displayed an unscientific understanding of mental illness and 
had difficulty distinguishing mental illness from ordinary 
unhappiness. It was this misunderstanding of mental illness, 
along with the fear of unpredictable and violent behavior that 
perpetuated the social stigma behind it.\33\
---------------------------------------------------------------------------
    \32\ Id.
    \33\ Id.
---------------------------------------------------------------------------
    Although Americans had achieved a better scientific 
understanding of mental illness by 1996, social stigma had not 
diffused. As the public's acceptance of classifying anxiety and 
depression as mental disorders has grown so has their 
perception that mental illness frequently incorporates violent 
behavior.\34\ In 1996, 31 percent of the people surveyed 
mentioned violence in their descriptions of mental illness, in 
comparison with 13 percent in the 1950s.\35\
---------------------------------------------------------------------------
    \34\ Id.
    \35\ Id.
---------------------------------------------------------------------------
    In the late 1990s, people with diagnosable mental disorders 
did not seek treatment due to the social stigma surrounding 
mental illness.\36\ Furthermore, the public was reluctant to 
pay for less severe mental health conditions due in large part 
to stigma but also due to their realization that higher taxes 
and premiums would be necessary to offset these costs.\37\ As 
former First Lady Carter testified, ``if insurance covered 
mental illnesses, it would be right to have them. This may be 
why the stigma has remained so pervasive. Because these 
illnesses are treated differently from other health 
conditions.'' \38\
---------------------------------------------------------------------------
    \36\ Id.
    \37\ Id.
    \38\ Carter Testimony at 2.
---------------------------------------------------------------------------

Mental health coverage today

    Health insurance plans have long imposed barriers that 
limit access to needed behavioral health care with far-reaching 
and often tragic results.\39\ No comparable barriers limit 
access to needed care for any other illness. The discriminatory 
practices that have continued over forty years after the 
adoption of the first modern civil rights' laws attest to the 
deep-rootedness of stigma surrounding behavioral disorders.\40\
---------------------------------------------------------------------------
    \39\ Shern Testimony at 2.
    \40\ Id.
---------------------------------------------------------------------------
    In 2004, more than 23 million people aged 12 or older 
required treatment for alcohol or illicit drug use but only 2.3 
million received it.\41\ For the 21.1 million who did not 
obtain treatment, cost and insurance barriers were cited as the 
primary obstacle.\42\ In 2002, the Kaiser Family Foundation/
Health Research and Educational Trust conducted an employer 
survey which found that while 98 percent of workers with 
employer-sponsored health insurance had coverage for mental 
health care, 74 percent of those covered workers were subject 
to an annual outpatient visit limit, and 64 percent were 
subject to an annual inpatient days limits.\43\
---------------------------------------------------------------------------
    \41\ National Institutes of Mental Health, supra note 25.
    \42\ Id.
    \43\ Henry J. Kaiser Family Foundation and Health Research and 
Educational Trust (KFF/HRET) national employer survey (2002).
---------------------------------------------------------------------------
    In her testimony before the House Energy and Commerce 
Committee hearing, Marley Prunty-Lara testified about her 
struggle with bipolar disorder and the difficulty she 
experienced when trying to get treatment. Prunty-Lara told of 
how she experienced first-hand the ``harrowing, sinister, 
suicidal depression no one talks about.'' \44\ However, as a 
15-year-old with bipolar disorder, her mother struggled to find 
her treatment. Her state of South Dakota had limited mental 
health resources and the waiting list was four to five months 
to simply get an initial appointment. Prunty-Lara had to go 350 
miles away to finally get treatment, however her treatment 
facility was not covered by her mother's insurance. 
Consequently, her parents were forced to take out a second 
mortgage on their home to pay for the life-saving 
treatment.\45\
---------------------------------------------------------------------------
    \44\ H.R. 1424, The Paul Wellstone Mental Health and Addiction 
Equity Act, hearing before the House Committee on Energy and Commerce, 
Subcommittee on Health, 110th Cong., 1st Sess., June 2007 (written 
testimony of Marley Prunty-Lara) [hereinafter Prunty-Lara Testimony].
    \45\ Id. at 1-2.
---------------------------------------------------------------------------
    Evidence demonstrates without adequate treatment, mental 
illnesses can continue or worsen in severity. Each year, 30,000 
Americans take their lives, hundreds of thousands attempt to do 
so, and in ninety percent of these situations, the cause is 
untreated mental illness.\46\
---------------------------------------------------------------------------
    \46\ The Paul Wellstone Mental Health and Addiction Equity Act of 
2007 (H.R. 1424), hearing before the Subcommittee on Health, 
Employment, Labor, & Pensions, 110th Cong., 1st Sess. (2007) at 5 
(written testimony of David Wellstone) [hereinafter Wellstone 
Testimony].
---------------------------------------------------------------------------
            The first federal mental health parity law
    Congress took a first step toward ending discriminatory 
insurance practices with the enactment of the Mental Health 
Parity Act of 1996. As the first mental health parity law, MHPA 
sought to address the discrepancies in coverage between mental 
and other illnesses. The new law required employer-sponsored 
group health plans to abide by a set of new federal standards 
on mental health coverage. Specifically, the law prohibits 
employers from imposing annual or lifetime dollar limits on 
mental health coverage that are more restrictive than those 
imposed on medical and surgical coverage.\47\
---------------------------------------------------------------------------
    \47\ General Accounting Office, supra note 22 at 3.
---------------------------------------------------------------------------
    Through its adoption, significant progress has been made in 
the way of providing mental health coverage to those Americans 
suffering from a mental illness. During his testimony before 
the Education and Labor HELP Subcommittee on July 10, 2007, 
John Breyfogyle, testifying on behalf of the American Benefits 
Council, acknowledged that ``better medical evidence on 
behavioral health conditions has become available and better 
treatment options have advanced during this period.'' \48\
---------------------------------------------------------------------------
    \48\ The Paul Wellstone Mental Health and Addiction Equity Act of 
2007 (H.R. 1424), hearing before the Subcommittee on Health, 
Employment, Labor, & Pensions, 110th Cong., 1st Sess. (2007) at 1 
(written testimony of John Breyfogyle) [hereinafter Breyfogyle 
Testimony].
---------------------------------------------------------------------------
    While the 1996 Act represented an important milestone, it 
has not produced fundamental changes.\49\ People with or at 
risk of behavioral-health disorders continue to face arbitrary 
discrimination in insurance plans. When reviewing the 
implementation of MHPA, GAO reported that the vast majority of 
issuers and group health plans it surveyed complied with the 
law, but substituted new restrictions and limitations on mental 
health benefits, thereby evading the letter of the law.\50\ 
While the MHPA moved most employer plans toward parity in 
dollar limits for mental health coverage, the GAO reported that 
87 percent of complying employers contained at least one other 
plan design feature that was more restrictive for mental health 
benefits than for medical and surgical benefits. Furthermore, 
one-fourth of employers did not comply, leaving their dollar 
limits unchanged.\51\
---------------------------------------------------------------------------
    \49\ Shern Testimony at 2.
    \50\ General Accounting Office, supra note 22 at 21.
    \51\ Id.
---------------------------------------------------------------------------
    Loopholes in MHPA have created a system where employers 
routinely limit mental health benefits more severely than 
medical and surgical coverage, most often by restricting the 
number of covered outpatient visits and hospital days and by 
imposing far higher cost sharing requirements.\52\ These 
loopholes allow employers and insurance companies to deny 
mental health coverage to individuals and families most in need 
of it.\53\ Consequently, individuals and families with adequate 
health care coverage will continue to watch their premiums 
increase as the uninsured and those with limited coverage 
continue to go to the emergency room to treat an illness that 
could have been cured at a far less cost if treated earlier in 
a doctor's office.
---------------------------------------------------------------------------
    \52\ Id. at 13-14.
    \53\ Kennedy, supra note 30.
---------------------------------------------------------------------------

The Need to expand access to mental health care

    Parity in mental health is needed because of the enormous 
impact that mental illness and substance abuse has on our 
society. Mental illness and substance abuse result in 
substantial lost productivity and absenteeism. It has been 
determined that mental illness and substance abuse cause more 
days of work loss and work impairment than many other chronic 
conditions such as diabetes, arthritis, and asthma. 
Approximately 217 million days of work are lost annually due to 
productivity decline related to mental illness and substance 
abuse disorders, costing employers approximately $17 billion 
each year.\54\
---------------------------------------------------------------------------
    \54\ Dr. Robin Hertz. ``The Impact of Mental Disorders on Work.'' 
Pfizer Pharmaceutical Group. (June 2002) available at http://
www.pfizer.com/pfizer/download/health/pubs__facts__workimpact.pdf.
---------------------------------------------------------------------------
    According to Congressman Patrick Kennedy, who testified at 
the HELP Subcommittee hearing on the ``Paul Wellstone Mental 
Health and Addiction Equity Act'' on July 10, 2007, it is 
estimated that:
    untreated mental health and addiction cost employers and 
society hundreds of billions of dollars in lost productivity. 
The World Health Organization has found that these diseases are 
far and away the most disabling diseases, accounting for more 
than a fifth of all lost days of productive life. Depressed 
workers miss 5.6 hours per week of productivity due to 
absenteeism and presenteeism, compared to 1.5 hours for non-
depressed workers. Alcohol-related illness and premature death 
cost over $129.5 billion in lost productivity per year.\55\
---------------------------------------------------------------------------
    \55\ The Paul Wellstone Mental Health and Addiction Equity Act, 
hearing before the Subcommittee on Health, Employment, Labor, & 
Pensions, 110th Cong., 1st Sess. (2007) (written testimony of Rep. 
Patrick Kennedy) [hereinafter Kennedy Testimony].

    Many U.S. business leaders fully understand the high 
returns wielded when investing in full mental health benefits 
for their employees. For example, James Hackett, the CEO of 
Ocean Energy, said that the increase in annual health costs to 
offer full parity between mental and physical health benefits 
is ``more than offset by avoided costs of lost employee 
productivity.'' \56\
---------------------------------------------------------------------------
    \56\ Kennedy, supra note 30 at 367.
---------------------------------------------------------------------------
            Gaps in coverage due to insurance discrimination
    While considerable scientific evidence supports the claim 
that a separation between the mind and body does not exist, 
stigma and insurance discrimination continue to stand in the 
way for many Americans seeking access to adequate mental health 
coverage.\57\ Despite the fact that former Surgeon General 
David Satcher wrote in his report on mental health in 1999 that 
the distinction between mind and body is arbitrary and not 
supported by science \58\ and the National Institute of Mental 
Health continues to provide scientific evidence of the 
physiology of mental illness,\59\ our country's insurance 
policies continue to perpetuate the stigma and discrimination 
surrounding mental illness.\60\
---------------------------------------------------------------------------
    \57\ Id.
    \58\ SGRMH at 5-6.
    \59\ See, e.g., Nat'l Inst. of Mental Health, Schizophrenia 
Research 2 (May 2000) (noting that NIMH investigators have ``recently 
discovered specific, subtle abnormalities in the structure and function 
of the brains of patients with schizophrenia''); Nat'l Inst. of Mental 
Health, Bipolar Disorder Research 4 (Apr. 2000), (concluding that 
``[o]ne of the most consistent findings to date has been the appearance 
of specific abnormalities, or lesions, in the white matter of the brain 
in patients with bipolar disorder''); Nat'l Institute of Mental Health, 
Anxiety Disorder Research 3 (August 1999) (finding that animal research 
suggests ``different anxiety disorders may be associated with 
activation in different parts of the amygdala [a structure in the 
brain]'').
    \60\ See GAO Report, supra note 22, at 12 (finding that more than a 
quarter of private health plans require greater cost-sharing for mental 
health care than physical health care); See also, Colleen L. Barry et 
al., Design of Mental Health Benefits: Still Unequal After All These 
Years, Health Affairs, Sept.-Oct. 2003, at 127, 129 (finding that 22% 
of private health plans have greater cost-sharing for mental health 
care).
---------------------------------------------------------------------------
    Employers and insurance companies routinely discriminate 
against mental health coverage when it comes to reimbursing 
individuals for their mental benefits. Insurers routinely 
increase patients' costs for mental health treatment by 
limiting inpatient days, capping outpatient visits, and 
requiring higher co-payments than for physical illnesses. It is 
estimated that over 90 percent of workers with employer-
sponsored health insurance are enrolled in plans that impose 
higher costs in at least one of these ways. Furthermore, 48 
percent are enrolled in plans that impose all three 
limitations.\61\
---------------------------------------------------------------------------
    \61\ Colleen Barry et al., ``Design of Mental Health Benefits: 
Still Unequal After All These Years,'' Health Affairs, September/
October 2003.
---------------------------------------------------------------------------
    In 2000, GAO found that issuers and group health plans 
provide more limited mental health coverage primarily because 
of cost concerns. Limits on hospital days, outpatient office 
visits, and annual or lifetime dollar amounts may reflect an 
issuer's concern about the high costs associated with long-
term, intensive psychotherapy and extended hospital stays. 
Issuers may also restrict mental health benefits to protect 
themselves from perceived fears of adverse selection based on 
the argument that a plan with generous mental health benefits 
is more likely to attract a disproportionate number of 
individuals with a high demand for mental health services, and 
thus may drive up claims and premium costs of the plan.\62\
---------------------------------------------------------------------------
    \62\ Id.
---------------------------------------------------------------------------
    In his testimony before the Education and Labor HELP 
Subcommittee David Wellstone stated that in a ``recent study of 
employer provided benefits . . . . the cost-sharing for 
addiction benefits was 46% higher for addiction benefits than 
for medical or surgical benefits and there were no out of 
pocket spending caps for addiction spending in 44% of the plans 
studied.'' \63\
---------------------------------------------------------------------------
    \63\ Wellstone Testimony.
---------------------------------------------------------------------------
            Gaps in coverage due to the limited reach of state laws
    The inequities in mental health coverage were first 
addressed by the states in the 1970s. In 1991, Texas and North 
Carolina were the first states to enact mental health parity 
legislation.\64\ Today, 46 states have some type of mental 
health law but they vary considerably and can be divided into 
three categories: (1) mental health ``full parity'' or ``equal 
coverage'' laws; (2) minimum mandated mental health benefit 
laws; and (3) mandated mental health ``offering laws.'' \65\
---------------------------------------------------------------------------
    \64\ Sundararaman, supra note 8.
    \65\ The National Conference of State Legislatures, ``State Laws 
Mandating or Regulating Mental Health Benefits,'' available at: http://
www.ncsl.org/programs.health.mentalben.htm.
---------------------------------------------------------------------------
    Full mental health parity laws prohibit insurers or group 
health plans from discriminating between coverage offered for 
mental illness, serious mental illness, substance abuse, and 
other physical disorders or diseases, and requires them to 
offer the same level of benefits across the board. ``Full 
parity'' means that an individual receives the same health care 
coverage for physical illnesses and mental health coverage, 
including treatment limitations and financial requirements.
    Today, 28 states have laws that mandate full-parity mental 
health coverage.\66\ Although mental health parity laws have 
increased coverage, they also have important limitations. 
Besides the fact that they do not apply to self-insured group 
health plans due to interpretations of ERISA's preemption 
clause,\67\ these state full-parity laws seldom provide 
catastrophic coverage against the financial risk of severe 
mental illness.\68\
---------------------------------------------------------------------------
    \66\ Sundararaman, supra note 8 at 7.
    \67\ The National Conference of State Legislatures, ``State Laws 
Mandating or Regulating Mental Health Benefits,'' available at: http://
www.ncsl.org/programs.health.mentalben.htm.
    \68\ Sundararaman, supra note 8 at 15.
---------------------------------------------------------------------------
    In addition, state laws mandating full-parity differ in the 
types of mental illnesses and health plans they cover. In 
twelve of the states offering full-parity, the laws only apply 
to the treatment of all the conditions listed in the DSM-
IV,\69\ while the other state full-parity laws restrict 
coverage to specified ``serious'' or ``biological based'' 
mental illness. In fifteen of the states that offer full 
parity, the laws apply to both insured group and individual 
health plans, compared to nine states where the laws only apply 
to insured group health plans.
---------------------------------------------------------------------------
    \69\ The DSM-IV is a categorization of psychiatric diagnoses for 
all mental health disorders for both children and adults. The manual 
also lists known causes of these disorders, statistics in terms of 
gender, age at onset, and prognosis, as well as some research 
concerning the optimal treatment approaches. Mental health 
professionals use the DSM-IV when working with patients in order to 
better understand their illness and potential treatment and to help 3rd 
party payers (e.g., insurance providers) understand the needs of the 
patient. The book is typically considered the `bible'' for any 
professional who makes psychiatric diagnoses in the United States and 
many other countries. See also: http://allpsych.com/disorders/dsm.html.
---------------------------------------------------------------------------
    Six states have enacted minimum mandated benefit laws. 
These laws require ``some'' level of coverage be provided for 
mental illness, serious mental illness, substance abuse or a 
combination thereof. This is not considered full parity because 
these laws allow discrepancies in the level of benefits 
provided between mental illnesses and physical illnesses. These 
discrepancies can be in the form of different visit limits, co-
payments, deductibles and annual lifetime limits.\70\
---------------------------------------------------------------------------
    \70\ Sundararaman, supra note 8 at 7.
---------------------------------------------------------------------------
    Fourteen states have enacted mandated offering laws. 
Mandated offering laws differ from the full-parity and minimum 
mandated benefit laws because they do not require that benefits 
be provided at all. Rather, they require that: (1) an option of 
coverage for mental illness, serious mental illness, substance 
abuse or a combination, be provided to the insured (this option 
can be accepted or rejected by the health service plan); and 
(2) if benefits are offered they must be equal.\71\
---------------------------------------------------------------------------
    \71\ The National Conference of State Legislatures, ``State Laws 
Mandating or Regulating Mental Health Benefits,'' available at: http://
www.ncsl.org/programs.health.mentalben.htm.
---------------------------------------------------------------------------
    States with full-parity laws include Arkansas, California, 
Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Iowa, 
Maine, Massachusetts, Minnesota, Montana, New Hampshire, New 
Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, 
South Carolina, South Dakota, Vermont, Virginia, Washington, 
and West Virginia. States with minimum mandated benefits 
include Alaska, Maryland, Michigan, Nevada, North Dakota, 
Oregon, Pennsylvania, Tennessee, and Texas. States providing 
mandated offering law include Alabama, Arizona, District of 
Columbia, Florida, Georgia, Indiana, Kansas, Kentucky, 
Louisiana, Mississippi, Missouri, Nebraska, New Mexico, Utah 
and Wisconsin.\72\
---------------------------------------------------------------------------
    \72\ Sundararaman, supra note 8 at 26.
---------------------------------------------------------------------------

Mental health parity is cost-effective

    Fair and equitable mental health treatment can be offered 
as part of a health benefit package without escalating costs. 
However, opponents of mental health parity often cite cost and 
an increased burden on employers as the reason to reject mental 
health parity. But as Representative Jim Ramstad noted in his 
testimony before the Education and Labor Committee, HELP 
Subcommittee, ``expanding access to treatment is not only the 
right thing to do; it's also cost-effective . . . for the price 
of a cheap cup of coffee per month, sixteen million people in 
health plans could receive treatment for their mental illness 
or chemical addiction.\73\
---------------------------------------------------------------------------
    \73\ The Paul Wellstone Mental Health and Addiction Equity Act of 
2007 (H.R. 1424), hearing before the Subcommittee on Health, 
Employment, Labor, & Pensions, 110th Cong., 1st Sess. (2007) at 5 
(written testimony of Rep. Jim Ramstad) [hereinafter Ramstad 
Testimony].
---------------------------------------------------------------------------
    In his testimony before the Energy and Commerce Committee, 
Subcommittee on Health, James Purcell, President and CEO of 
Blue Cross & Blue Shield of Rhode Island (``BCBSRI'') testified 
about BCBSRI's efforts to integrate behavioral and physical 
health, as it is the future and so fundamental to complete 
care.\74\ Purcell testified that not only is this the right 
thing to do, it is cost effective. The impact on claims costs 
of limiting annual coverage to fifteen visits rather than 30 
visits would be approximately 0.3 percent of total claims.'' 
\75\
---------------------------------------------------------------------------
    \74\ H.R. 1424, the Paul Wellstone Mental Health and Addiction 
Equity Act, hearing before the Energy and Commerce Committee, 
Subcommittee on Health, 110th Cong., 1st Sess. (2007) (written 
testimony of James E. Purcell) [hereinafter Purcell Testimony].
    \75\ Id. at 4.
---------------------------------------------------------------------------
    Numerous studies support the conclusion that while mental 
health parity imposes a nominal increase in costs to employers, 
it greatly benefits society as a whole. Stephen Melek, Bruce 
Pyenson, and Kathryn Fitch at Milliman Consultants and 
Actuaries issued a report on July 5, 2007 entitled, An 
Actuarial Analysis of the Impact of H.R. 1424. The study 
analyzed the estimated cost of implementing H.R. 1424.\76\ By 
evaluating the approximate cost of implementing mental health 
parity in comparison to the cost of implementation if the 
organization implements utilization management (UM), where all 
benefit plans would choose to further tighten their degree of 
behavioral healthcare management.
---------------------------------------------------------------------------
    \76\ Stephen Melek, Bruce Pyenson, and Kathryn Fitch, An Actuarial 
Analysis of the Impact of H.R. 1424, ``The Paul Wellstone Mental Health 
and Addiction Equity Act of 2007,'' (July 2007). See also, The Paul 
Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424), 
hearing before the Subcommittee on Health, Employment, Labor, & 
Pensions, 110th Cong., 1st Sess. (2007) at 5 (written testimony of 
Stephen Melek) [hereinafter Melek Testimony].
---------------------------------------------------------------------------
    The Milliman study projected that the cost increase for 
health insurance premiums would rise by between less than 0.1 
percent and 0.6 percent, or between $0.03 and $2.40 per member 
per month. Employer contributions for health costs would rise 
by between less than 0.1 percent and 0.2 percent.\77\ 
Utilization of facility-based behavioral healthcare services 
would increase by 9.7 percent, while professional services 
would increase by 30.0 percent without UM.\78\ However, with 
UM, it projects a 21.3 percent decrease in use of facility-
based services (the majority from mental health services) and a 
3.1 percent increase for professional services. Member out-of-
pocket costs for behavioral health services would decrease by 
18 percent or about $0.20 per member per month without UM, 
reflecting balance between an increase in total out-of-pocket 
costs from higher service use by members under the higher 
parity benefit limits and a decrease in out-of-pocket costs per 
unit due to lower parity cost-sharing. For every 100,000 fully 
insured lives, member out-of-pocket costs are estimated to drop 
by $240,000 annually. Finally, the study estimates that 
administrative costs account for about 15 percent of the total 
increase, or $0.36 or less per member per month.\79\
---------------------------------------------------------------------------
    \77\ Id. at 3.
    \78\ Id.
    \79\ Id. at 4.
---------------------------------------------------------------------------
    Howard Goldman testified before the Energy and Commerce 
Committee \80\ about his work, including that contained within 
the ``Surgeon General's Report on Mental Health,'' including 
his analysis of the cost of implementing the parity policy in 
the Federal Health Employee Benefit (FEHB) program. His 
research concluded that the policy was implemented smoothly and 
that plans did not drop out of the FEHB program. As a result, 
he further found that there was a significant decline in out-
of-pocket spending in the FEHB plans compared to the non-parity 
plans. Goldman testified that this indicates parity coverage 
resulted in improved insurance protection against financial 
risks--the principal objective of health insurance. This 
savings to FEHB plan members was not associated with 
significant increases in use and spending attributable to 
parity. In fact, for the most part, increases in use and total 
spending in the FEHB plans were no greater than use and total 
spending increases in the comparison plans. This was true for 
adults, as well as for children and adolescents. The study 
concluded that parity of coverage of mental health and 
substance abuse services, when coupled with management of care, 
is feasible and can accomplish its objectives of greater 
fairness and improved insurance protection without adverse 
consequences for health care costs.\81\
---------------------------------------------------------------------------
    \80\ H.R. 1424, the Paul Wellstone Mental Health and Addiction 
Equity Act, hearing before the House Committee on Energy and Commerce, 
Subcommittee on Health, 110th Cong., 1st Sess., June 2007 (written 
testimony of Dr. Howard Goldman) [hereinafter Goldman Testimony].
    \81\ Id.
---------------------------------------------------------------------------
    In the 2000 GAO report on mental health parity, GAO found 
that the federal parity law appears to have had a negligible 
effect on claims costs. Only about 3 percent of responding 
employers reported that compliance with the law increased their 
claim costs, and virtually no employers had dropped their 
mental health benefits or health coverage altogether since the 
law was enacted.\82\ In addition, the CBO scored the Senate 
parity bill, S. 558 and concluded that there will be a nominal 
increase, approximately .4 percent,\83\ in cost to a group 
health plan over the next ten years.
---------------------------------------------------------------------------
    \82\ Government Accountability Office, supra note 22 at 6.
    \83\ CBO anticipates that approximately 60 percent of the .4 
percent cost increase will be offset by employers changing the scope of 
benefits offered as a result of S. 558. The remaining 40 percent of the 
cost increase is expected to be covered by employees.
---------------------------------------------------------------------------

                     V. Section-by-Section Analysis


Title of the bill

    Section 1. Provides that the short title of H.R. 1424 is 
the ``Paul Wellstone Mental Health and Addiction Equity Act of 
2007.''

Amendments to the Employee Retirement Income Security Act of 1974

    Section 2(a): Amends Employee Retirement Income Security 
Act of 1974 (ERISA) to require group health plans offering 
mental health and substance abuse coverage to apply the same 
treatment limitations to mental health and substance benefits 
as they do for medical and surgical benefits.
    Section 2(a)(1) ``(3)(C)'': Categorizes the following items 
and services subject to mental health and substance-related 
treatment limit parity requirements (1) Inpatient, in-network; 
(2) inpatient, out-of-network; (3) outpatient, in-network; (4) 
outpatient, out-of-network. Section 2(a)(1) ``(3)(C)(v)'': Adds 
emergency care to the list of categories of items and services 
that are subject to the mental health and substance-related 
treatment limit parity requirements.
    Section 2(a)(1) ``(3)(D)'': Defines ``treatment limit'' 
under a health plan as limitation on the number of visits or 
days of coverage, or other similar limit on the duration or 
scope of treatment.
    Section 2(a)(1) ``(4)(A)'': Requires group health plan 
offering mental health benefits to apply the same financial 
limitations to mental health benefits as they do to medical and 
surgical benefits. This includes limits on deductibles, co-
payments, coinsurance, out-of-pocket expenses, and annual and 
lifetime limits. Plans are prohibited from establishing cost-
sharing requirements that are specific to mental health 
benefits.
    Section 2(a)(1) ``(4)(B)'': Requires group health plan 
offering substance-related benefits, to apply the same 
financial limitations to mental health benefits as they do to 
medical and surgical benefits. This includes limits on 
deductibles, co-payments, coinsurance, out-of-pocket expenses, 
and annual and lifetime limits. Plans are prohibited from 
establishing cost-sharing requirements that are specific to 
mental health benefits.
    Section 2(a)(1) ``(4)(B)(iii)'': Clarifies that nothing in 
this section prohibits a group health plan for waiving any 
deductible for mental health benefits and/or substance-related 
disorder benefits.
    Section 2(b): Changes the term ``mental health benefits'' 
to ``mental health or substance abuse-related disorder 
benefits.''
    Section 2(c): Makes available to a plan administrator the 
criteria for what is considered a medically necessary treatment 
for a mental illness or substance abuse disorder.
    Section 2(d): Provides a minimum mental health and 
substance-related benefits package. If a group health plan 
offers mental health or substance-related benefits then it must 
cover the same range of mental illnesses and addiction 
disorders covered by the Federal Employee Health Benefit 
(FEHBP) plans with the highest average enrollment as of the 
beginning of the most recent year beginning on or before the 
beginning of the plan year involved.
    Section 2(d) ``(6)'': With respect to out-of-network 
coverage, requires group health plans offering mental health 
and substance-related benefits, to apply the same coverage they 
offer for medical and surgical services to mental health and 
substance-related benefits
    Section 2(e): Makes clear that group health plans may 
utilize benefit management practices for medical, surgical, 
mental health and substance related disorder benefits to the 
extent that these methods are recognized both by the industry 
and by providers and are not prohibited under applicable State 
laws.
    Section 2(f): Provides an exemption to group health plans 
whose costs exceed 2% in the first plan year after initiation 
or 1% in each subsequent year.
    Section 2(g): Provides an exemption for small employers 
with 50 or fewer employees, as well as employers who experience 
an increase in claim costs of at least 2% in the first plan 
year and 1% in subsequent years.
    Section 2(i): Clarifies that nothing in this section 
preempts any State law that provides consumer protections, 
benefits, methods of access to benefits, rights, external 
review programs, or remedies solely related to health insurance 
issuers except to the extent that such provision prevents the 
application of a requirement of this part.
    Section 2(j): Conforms section 712 heading.
    Section 2(k)(1): Makes the effective date of this section 
on or after January 1, 2008.
    Section 2(k)(2): Makes clear that collectively bargained 
plans become subject to the act upon the expiration of the 
collective bargaining agreement or by January 1, 2010.
    2(l): Requires the Department of Labor to annually sample 
and conduct random audits of group health plans to ensure 
compliance with the Act.

Section 3 amendments to the Public Health Service Act

    Section 3(a)(1): Amends the Public Health Service Act to 
require group health plans offering mental health and substance 
abuse benefits to apply the same treatment limitations on 
mental health and substance abuse benefits as they do for 
medical and surgical benefits.
    Section 3(a)(1) ``(3)(C)'': Categorizes the following items 
and services subject to mental health and substance-related 
treatment limit parity requirements (1) Inpatient, in-network; 
(2) inpatient, out-of-network; (3) outpatient, in-network; (4) 
outpatient, out of network. Section 3(a)(1) ``(3)(D)'': Defines 
``treatment limit'' under a health plan as limitation on the 
number of visits or days of coverage, or other similar limit on 
the duration or scope of treatment.
    Section 3(a)(1) ``(4)(A)'': Requires group health plan 
offering mental health to apply the same financial limitations 
to mental health benefits as they do to medical and surgical 
benefits. This includes limits on deductibles, co-payments, 
coinsurance, out-of-pocket expenses, and annual and lifetime 
limits. Plans are prohibited from establishing cost-sharing 
requirements that are specific to mental health benefits.
    Section 3(a)(1) ``(4)(B)'': Requires group health plan 
offering substance-related coverage, to apply the same 
financial limitations to substance abuse benefits as they do to 
medical and surgical benefits. This includes limits on 
deductibles, co-payments, coinsurance, out-of-pocket expenses, 
and annual and lifetime limits. Plans are prohibited from 
establishing cost-sharing requirements that are specific to 
mental health benefits.
    Section 3(b): Changes the term ``mental health benefits'' 
to ``mental health or substance abuse related disorder 
benefits.''
    Section 3(c): Makes available to a plan administrator the 
criteria for what is considered a medically necessary treatment 
for a mental illness or substance abuse disorder.
    Section 3(d): Provides a minimum mental health and 
substance-related benefits package. If a group health plan 
offers mental health or substance-related benefits, then it 
must cover the same range of mental illnesses and addiction 
disorders covered by the Federal Employee Health Benefit 
(FEHBP) plans.
    Section 3(d) ``(6)(B)'': With respect to out-of-network 
coverage, requires group health plans offering mental health 
and substance-related benefits, to apply the same coverage they 
offer for medical and surgical services to mental health and 
substance-related benefits.
    Section 3(e): Provides an exemption for employers who 
experience an increase in claim costs of at least 2% in the 
first plan year and 1% in subsequent years.
    Section 3(f): Provides an exemption for small employers 
with 50 or fewer employees.
    Section 3(h): Clarifies that nothing in this section 
preempts any State law that provides greater consumer 
protections, benefits, methods of access to benefits, or rights 
or remedies.
    Section 3(i): Conforms section 712 heading.
    Section 3(j): Makes the effective date of this section on 
or after January 1, 2008.

Section 4 amendments to the Internal Revenue Code of 1986

    Section 4(a): Amends the Internal Revenue Code to require 
group health plans offering mental health and substance abuse 
benefits to apply the same treatment limitations on mental 
health and substance abuse benefits as they do for medical and 
surgical benefits.
    Section 4(a)(1) ``(3)(C)'': Categorizes the following items 
and services subject to mental health and substance-related 
treatment limit parity requirements (1) Inpatient, in-network; 
(2) inpatient, out-of-network; (3) outpatient, in-network; (4) 
outpatient, out of network.
    Section 4(a)(1) ``(3)(D)'': Defines ``treatment limit'' 
under a health plan as limitation on the number of visits or 
days of coverage, or other similar limit on the duration or 
scope of treatment.
    Section 4(a)(1) ``(4)(A)'': Requires group health plan 
offering mental health to apply the same financial limitations 
to mental health benefits as they do to medical and surgical 
benefits. This includes limits on deductibles, co-payments, 
coinsurance, out-of-pocket expenses, and annual and lifetime 
limits. Plans are prohibited from establishing cost-sharing 
requirements that are specific to mental health benefits.
    Section 4(a)(1) ``(4)(B)'': Requires group health plan 
offering substance-related coverage, to apply the same 
financial limitations to substance abuse benefits as they do to 
medical and surgical benefits. This includes limits on 
deductibles, co-payments, coinsurance, out-of-pocket expenses, 
and annual and lifetime limits. Plans are prohibited from 
establishing cost-sharing requirements that are specific to 
mental health benefits.

Section 4(b): Expands coverage of substance-related disorder benefits 
        under the Internal Revenue Code.

    Section 4(c): Makes available to a plan administrator the 
criteria for what is considered a medically necessary treatment 
for a mental illness or substance abuse disorder.
    Section 4(d) ``(6)(A)'': Provides a minimum mental health 
and substance-related benefits package. If a group health plan 
offers mental health or substance-related benefits, then it 
must cover the same range of mental illnesses and addiction 
disorders covered by the Federal Employee Health Benefit 
(FEHBP) plans.
    Section 4(d) ``(6)(B)'': Requires group health plans 
offering mental health and substance-related benefits, to apply 
the same out-of-network coverage they offer for medical and 
surgical services to mental health and substance-related 
benefits.
    Section 4(e): Provides an exemption to employers who 
experience an increase in claim costs of at least 2% in the 
first plan year and 1% in subsequent years.
    Section 4(f): Provides an exemption for small employers 
with 50 or fewer employees.
    Section 4(h): Conforms section 712 heading.
    Section 4(i): Makes the effective date of this section on 
or after January 1, 2008.

Section 5 Government Accountability Office studies and reports

    Section 5(a): Requires the Comptroller General of the 
United States to conduct a study that evaluates implementation 
of the Paul Wellstone Mental Health and Addiction Equity Act. 
The study will analyze: (1) access to health insurance 
coverage; (2) the quality of such coverage, Medicare, Medicaid, 
and State and local mental health and substance abuse treatment 
spending; (3) the number of individuals with private insurance 
receiving publicly funded healthcare for mental health and 
substance-related disorders; (4) spending on public services 
such as the criminal justice system, special education, and 
income assistance programs; (5) the use of medical management 
of mental health and substance-related disorder benefits and 
medical necessity determinations by group health plans; (6) and 
any other matters the Comptroller General thinks appropriate. 
The report must be submitted to Congress two years after the 
enactment of H.R. 1424.

                     VI. Explanation of Amendments

    The Amendment in the Nature of a Substitute is explained in 
the body of this report. Representative Kline introduced an 
amendment which would have substituted the Mental Health Parity 
Act (S. 558) for the Paul Wellstone Mental Health and Addiction 
Equity Act (H.R. 1424). The amendment was defeated 16-27.

           VII. Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1, the Congressional 
Accountability Act, requires a description of the application 
of this bill to the legislative branch. The Committee has 
determined that there is no legislative impact, since the 
Federal Employee Health Benefits (FEHB) program already 
provides parity for mental health care coverage pursuant to 
administrative rule making.

                   VIII. Regulatory Impact Statement

    The Committee has determined that H.R. 1424 will have 
minimal impact on the regulatory burden.

                     IX. Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This issue is addressed in the CBO cost estimate 
letter.

                          X. Earmark Statement

    H.R. 1424 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9(d), 9(e) or 9(f) of rule XXI.

                             XI. Roll Call



    XII. Statement of Oversight Findings and Recommendations of the 
                               Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the body of this report.

            XIII. New Budget Authority and CBO Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 and with respect to 
requirements of clause 3(c)(3) of rule XIII of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 1424 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 7, 2007.
Hon. George Miller,
Chairman, Committee on Education and Labor,
House of Representatives, Washington, DC.
    Dear Mr. Chairman:  The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1424, the Paul 
Wellstone Mental Health and Addiction Equity Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Shinobu 
Suzuki.
            Sincerely,
                                           Peter R. Orszag,
                                                          Director.
    Enclosure.

H.R. 1424--Paul Wellstone Mental Health and Addiction Equity Act of 
        2007

    Summary: H.R. 1424 would prohibit group health plans and 
group health insurance issuers that provide both medical and 
surgical benefits and mental health benefits from imposing 
treatment limitations or financial requirements for coverage of 
mental health benefits (including benefits for substance abuse 
treatment) that are different from those used for medical and 
surgical benefits.
    Enacting the bill would affect both federal revenues and 
direct spending for Medicaid, beginning in 2008. The bill would 
result in higher premiums for employer-sponsored health 
benefits. Higher premiums, in turn, would result in more of an 
employee's compensation being received in the form of 
nontaxable employer-paid premiums, and less in the form of 
taxable wages. As a result of this shift, federal income and 
payroll tax revenues would decline. The Congressional Budget 
Office estimates that the proposal would reduce federal tax 
revenues by $1.1 billion over the 2008-2012 period and by $3.1 
billion over the 2008-2017 period. Social Security payroll 
taxes, which are off-budget, would account for about 35 percent 
of those totals.
    The bill's requirements for issuers of group health 
insurance would apply to managed care plans in the Medicaid 
program. CBO estimates that enacting H.R. 1424 would increase 
federal direct spending for Medicaid by $310 million over the 
2008-2012 period and by $820 million over the 2008-2017 period. 
In addition, assuming appropriation of the necessary amounts, 
CBO estimates that implementing H.R. 1424 would have 
discretionary costs of $20 million in 2008, $143 million over 
the 2008-2012 period, and $322 million over the 2008-2017 
period.
    CBO has reviewed the non-tax provisions of the bill 
(sections 2, 3, and 5) and has determined that sections 2 and 3 
contain intergovernmental mandates as defined in the Unfunded 
Mandates Reform Act (UMRA). The bill would preempt state laws 
governing mental health coverage that conflict with those in 
this bill. However, because the preemption only would prohibit 
the application of state regulatory law, CBO estimates that the 
costs of the mandate to state, local, or tribal governments 
would not exceed the threshold established by UMRA ($66 million 
in 2007, adjusted annually for inflation).
    As a result of this legislation, some state, local, and 
tribal governments would pay higher health insurance premiums 
for their employees. However, these costs would not result from 
intergovernmental mandates, but would be costs passed on to 
them by private insurers who would face a private-sector 
mandate to comply with the requirements of the bill.
    The bill would impose a private-sector mandate on group 
health plans and group health insurance issuers by prohibiting 
them from imposing treatment limitations or financial 
requirements for mental health benefits that differ from those 
placed on medical and surgical benefits. Under current law, the 
Mental Health Parity Act of 1996 requires a more-limited form 
of parity between mental health and medical and surgical 
coverage. That mandate is set to expire at the end of 2007. 
Thus, H.R. 1424 would both extend and expand the existing 
mandate requiring mental health parity. CBO estimates that the 
direct costs of the private-sector mandate in the bill would 
total about $1.3 billion in 2008, and would grow in later 
years. That amount would significantly exceed the annual 
threshold established by UMRA ($131 million in 2007, adjusted 
for inflation) in each of the years that the mandate would be 
in effect.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1424 is shown in the following table. 
The costs of this legislation fall within budget function 550 
(health).

                                                        ESTIMATED BUDGETARY EFFECTS OF H.R. 1424
--------------------------------------------------------------------------------------------------------------------------------------------------------

By fiscal year, in millions of -------------------------------------------------------------------------------------------------------------------------
           dollars--              2008      2009      2010      2011      2012      2013      2014      2015      2016      2017    2008-2012  2008-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   CHANGES IN REVENUES

Income and HI Payroll Taxes          -20      -120      -170      -190      -210      -230      -250      -260      -280      -300       -710     -2,030
 (on-budget)..................
Social Security Payroll Taxes        -10       -70      -100      -100      -110      -120      -130      -140      -150      -160       -390     -1,090
 (off-budget).................
                               -------------------------------------------------------------------------------------------------------------------------
    Total Changes.............       -30      -190      -270      -290      -320      -350      -380      -400      -430      -460     -1,100     -3,120

                                                               CHANGES IN DIRECT SPENDING

Medicaid:
    Estimated Budget Authority        30        60        70        70        80        90        90       100       110       120        310        820
    Estimated Outlays.........        30        60        70        70        80        90        90       100       110       120        310        820

                                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Implementation costs for DOL:
    Estimated Authorization           25        30        30        30        35        35        35        35        35        40        150        330
     Level....................
    Estimated Outlays.........        20        29        30        30        34        35        35        35        35        39        143       322
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: HI=Hospital Insurance (Part A of Medicare); DOL=Department of Labor.

    Basis of estimate: H.R. 1424 would prohibit group health 
plans and group health insurance issuers who offer mental 
health benefits (including benefits for substance abuse 
treatment) from imposing treatment limitations or financial 
requirements for those benefits that are different from those 
used for medical and surgical benefits. For plans that offer 
mental health benefits through a network of mental health 
providers, the requirement for parity of benefits would be 
established by comparing in-network medical and surgical 
benefits with in-network mental health benefits, and comparing 
out-of-network medical and surgical benefits with out-of-
network mental health benefits. The provision would apply to 
benefits for any mental health condition that is covered under 
the group health plan.
    The bill would not require plans to offer mental health 
benefits. It would, however, require that the mental health 
benefits of plans that choose to offer such benefits be at 
least as generous as the Federal Employees Health Benefits Plan 
(FEHBP) with the highest average enrollment as of the beginning 
of the most recent plan year involved. Existing laws in some 
states, however, require that plans cover all types of mental 
health services or ailments, which would reduce the potential 
impact of this bill on health plan premiums.

Revenues

    The provisions of the bill would apply to both self-insured 
and fully insured group health plans. Small employers (those 
employing fewer than 50 employees in a year) would be exempt 
from the bill's requirements, as would individuals purchasing 
insurance in the individual market. The bill also would exempt 
group health plans for whom the cost of complying with the 
requirements would increase total plan costs (for medical and 
surgical benefits and mental health benefits) by more than 2 
percent in the first plan year following enactment, and 1 
percent in subsequent plan years. In general, H.R. 1424 would 
not preempt state laws regarding parity of mental health 
benefits except to the extent that state laws prohibit the 
application of a requirement of the bill.
    CBO's estimate of the cost of this bill is based in part on 
published results of a model developed by the Hay Group. That 
model relies on data from several sources, including the claims 
experience of private health insurers and the Medical 
Expenditure Panel Survey. CBO adjusted those results to account 
for the current and future use of managed care arrangements for 
providing mental health benefits and the increased use of 
prescription drugs that mental health parity would be likely to 
induce. Also, CBO took account of the effects of existing state 
and federal rules that place requirements similar to those in 
the bill on certain entities. (For example, the Office of 
Personnel Management implemented mental health and substance 
abuse parity in the FEHBP in January 2001.)
    CBO estimates that H.R. 1424, if enacted, would increase 
premiums for group health insurance by an average of about 0.4 
percent, before accounting for the responses of health plans, 
employers, and workers to the higher premiums that would likely 
be charged under the bill. Those responses would include 
reductions in the number of employers offering insurance to 
their employees and in the number of employees enrolling in 
employer-sponsored insurance, changes in the types of health 
plans that are offered (including eliminating coverage for 
mental health benefits and/or substance benefits), and 
reductions in the scope or generosity of health insurance 
benefits, such as increased deductibles or higher copayments. 
CBO expects that those behavioral responses would offset 60 
percent of the potential impact of the bill on total health 
plan costs.
    The remaining 40 percent of the potential increase in 
costs--less than 0.2 percent of group health insurance 
premiums--would occur in the form of higher spending for health 
insurance. Those costs would be passed through to workers, 
reducing both their taxable compensation and other fringe 
benefits. For employees of private firms, CBO assumes that all 
of that increase would ultimately be passed through to workers. 
State, local, and tribal governments are assumed to absorb 75 
percent of the increase and to reduce their workers' taxable 
income and other fringe benefits to offset the remaining one-
quarter of the increase. CBO estimates that the resulting 
reduction in taxable income would grow from $400 million in 
2008 to $4.5 billion in 2017.
    Those reductions in workers' taxable compensation would 
lead to lower federal tax revenues. CBO estimates that federal 
tax revenues would fall by $30 million in 2008 and by $3.1 
billion over the 2008-2017 period if H.R. 1424 were enacted. 
Social Security payroll taxes, which are off-budget, would 
account for about 35 percent of those totals.

Direct spending

    The bill's requirements for issuers of group health 
insurance would apply to managed care plans in the Medicaid 
program. CBO estimates that enacting H.R. 1424 would increase 
Medicaid payments to managed care plans by about 0.2 percent. 
That is less than the 0.4 percent increase in the estimated 
increase in spending for employer-sponsored health insurance 
because Medicaid programs offer broader coverage of mental 
health benefits than the private sector. CHO estimates that 
enacting H.R. 1424 would increase federal spending for Medicaid 
by $310 million over the 2008-2012 period and $820 million over 
the 2008-2017 period.

Spending subject to appropriation

    H.R. 1424 would require the Secretary of Labor to provide 
assistance to participants and beneficiaries of group health 
plans and conduct random audits of plans to ensure that they 
are in compliance with the requirements of the bill. The bill 
also would require the Secretary to submit a biennial report on 
obstacles that individuals face in obtaining care for mental 
health and substance related disorders. Based on the costs of 
implementing the Health Insurance Portability and 
Accountability Act of 1996, and assuming appropriation of the 
necessary amounts, CBO estimates that implementing H.R. 1424 
would incur discretionary costs of $20 million in 2008 and $30 
million to $40 million annually in subsequent years.
    Estimated impact on state, local, and tribal governments: 
H.R. 1424 would preempt state laws governing mental health 
coverage that conflict with those in this bill. That preemption 
would be an intergovernmental mandate as defined in UMRA. 
However, because the preemption would simply prohibit the 
application of state regulatory laws that conflict with the new 
federal standards, CBO estimates that the mandate would impose 
no significant costs on state, local, or tribal governments.
    An existing provision in the Public Health Service Act 
(PHSA) would allow state, local, and tribal governments, as 
employers that provide health benefits to their employees, to 
opt out of the requirements of this bill. Consequently, the 
bill's requirements for mental health parity would not be 
intergovernmental mandates as defined in UMRA, and the bill 
would affect the budgets of those governments only if they 
choose to comply with the requirements on group health plans. 
Roughly two-thirds of employees in state, local, and tribal 
governments are enrolled in self-insured plans.
    The remaining governmental employees are enrolled in fully 
insured plans. Governments purchase health insurance for those 
employees through private insurers and would face increased 
premiums as a result of higher costs passed on to them by those 
insurers. The increased costs, however, would not result from 
intergovernmental mandates. Rather, they would be part of the 
mandate costs initially borne by the private sector and then 
passed on to the governments as purchasers of insurance. CBO 
estimates that state, local, and tribal governments would face 
additional costs of about $10 million in 2008, increasing to 
about $155 million in 2012. This estimate reflects the 
assumption that governments would shift roughly 25 percent of 
the additional costs to their employees.
    Because the bill's requirements would apply to managed care 
plans in the Medicaid program, CBO estimates that state 
spending for Medicaid also would increase by about $235 million 
over the 2008-2012 period.
    Estimated impact on the private sector: The bill would 
impose a private-sector mandate on group health plans and 
issuers of group health insurance that provide medical and 
surgical benefits as well as mental health benefits (including 
benefits for substance abuse treatment). H.R. 1424 would 
prohibit those entities from imposing treatment limitations or 
financial requirements for mental health benefits that differ 
from those placed on medical and surgical benefits. The 
requirements would not apply to coverage purchased by employer 
groups with fewer than 50 employees. For plans that offer 
mental health benefits through a network of mental health 
providers, the requirement for parity of benefits would be 
established by comparing in-network medical and surgical 
benefits with in-network mental health benefits, and comparing 
out-of-network medical and surgical benefits with out-of-
network mental health benefits.
    Under current law, the Mental Health Parity Act of 1996 
prohibits group health plans and group health insurance issuers 
from imposing annual and lifetime dollar limits on mental 
health coverage that are more restrictive than limits imposed 
on medical and surgical coverage. The current mandate is set to 
expire at the end of calendar year 2007. Consequently, H.R. 
1424 would both extend and expand the current mandate requiring 
mental health parity.
    CBO's estimate of the direct costs of the mandate assumes 
that affected entities would comply with H.R. 1424 by further 
increasing the generosity of their mental health benefits, Many 
plans currently offer mental health benefits that are less 
generous than their medical and surgical benefits. We estimate 
that the direct costs of the additional services that would be 
newly covered by insurance because of the mandate would equal 
about 0.4 percent of employer-sponsored health insurance 
premiums compared to having no mandate at all.
    CBO estimates that the direct costs of the mandate in H.R. 
1424 would be $1.3 billion in 2008, rising to $3.0 billion in 
2012. Those costs would exceed the threshold specified in UMRA 
($131 million in 2007, adjusted annually for inflation) in each 
year the mandate would be in effect,
    Previous CBO estimate: On March 20, 2007, CBO transmitted a 
cost estimate for S. 558, the Mental Health Parity Act of 2007, 
as ordered reported by the Senate Committee on Health, 
Education, Labor, and Pensions on February 14, 2007. H.R. 1424 
differs from S. 558 in several ways: (1) it would require 
mental health benefits of plans that choose to offer such 
benefits be at least as generous as FEHBP with the highest 
average enrollment as of the beginning of the most recent plan 
year involved; (2) it would exempt group health plans with 
collective bargaining agreements from the requirements of the 
bill until the later of the expiration of such agreements or 
January 1, 2010; (3) it would make conforming modifications to 
the Internal Revenue Code (IRC); and (4) the provisions of H.R. 
1424 would apply to group health plans beginning January 1, 
2008, while S. 558 specified that the policy would be effective 
more than one year after the date of the enactment, affecting 
plans beginning on or after January 1, 2009.
    CBO estimates the minimum benefit requirement and exception 
for the collective bargaining agreements would have no 
significant budgetary effect, while the difference in the 
effective dates would affect our estimate in 2008 and 2009. CBO 
and the Joint Committee on Taxation estimate that conforming 
modifications to the IRC would result in a negligible excise 
tax revenue collected from employers who fail to comply with 
the requirements of the bill.
    Estimate prepared by: Federal Costs: Jeanne De Sa and 
Shinobu Suzuki; Impact on State, Local, and Tribal Governments: 
Lisa Ramirez-Branum; Impact on the Private Sector: Stuart 
Hagen.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis.

       XIV. Statement of General Performance Goals and Objectives

    In accordance with clause 3(c) of House rule XIII, the goal 
of H.R. 1424 is to increase access to mental health treatment 
and to prevent health insurance providers and employers from 
discriminating against individuals on the basis of mental 
illness.

                 XV. Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress in the 
Constitution to enact the law proposed by H.R. 1424. The 
amendments made by this bill increase access to mental health 
treatment by prohibiting group health plans (or health 
insurance coverage offered in connection with a group health 
plan) from imposing financial requirements (including 
deductibles, co-payments, coinsurance, out-of-pocket expenses, 
and annual lifetime limits) or treatment limitations (including 
limitations on the number of visits, days of coverage, 
frequency of treatment, or other similar limits on the scope 
and duration of treatment) on mental health benefits that are 
more restrictive than those restrictions applied to medical and 
surgical benefits. The Committee believes these amendments are 
within Congress' authority under Article I, Section 8, Clauses 
1 and 3 of the Constitution.

                        XVI. Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 1424. 
However, clause 3(d)(3)(B) of that rule provides that this 
requirement does not apply when the Committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

      XVII. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

           *       *       *       *       *       *       *



                   SHORT TITLE AND TABLE OF CONTENTS

  Section 1. This Act may be cited as the ``Employee Retirement 
Income Security Act of 1974''.

                            TABLE OF CONTENTS

Sec. 1. Short title and table of contents.
     * * * * * * *

                 Part 7--Group Health Plan Requirements

      Subpart A--Requirements Relating to Portability, Access, and 
                              Renewability

Sec. 701. Increased portability through limitation on
     * * * * * * *

                      Subpart B--Other Requirements

Sec. 711. Standards relating to benefits for mothers and newborns.
[Sec. 712. Parity in the application of certain limits to mental health 
          benefits.]
Sec. 712. Equity in mental health and substance-related disorder 
          benefits.

           *       *       *       *       *       *       *


Part 7--Group Health Plan Requirements

           *       *       *       *       *       *       *


Subpart B--Other Requirements

           *       *       *       *       *       *       *


[SEC. 712. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
                    MENTAL HEALTH BENEFITS.]

SEC. 712. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER 
                    BENEFITS.

  (a) In General.--
          (1) Aggregate lifetime limits.--In the case of a 
        group health plan (or health insurance coverage offered 
        in connection with such a plan) that provides both 
        medical and surgical benefits and [mental health 
        benefits] mental health or substance-related disorder 
        benefits--
                  (A) No lifetime limit.--If the plan or 
                coverage does not include an aggregate lifetime 
                limit on substantially all medical and surgical 
                benefits, the plan or coverage may not impose 
                any aggregate lifetime limit on [mental health 
                benefits] mental health or substance-related 
                disorder benefits.
                  (B) Lifetime limit.--If the plan or coverage 
                includes an aggregate lifetime limit on 
                substantially all medical and surgical benefits 
                (in this paragraph referred to as the 
                ``applicable lifetime limit''), the plan or 
                coverage shall either--
                          (i) apply the applicable lifetime 
                        limit both to the medical and surgical 
                        benefits to which it otherwise would 
                        apply and to [mental health benefits] 
                        mental health or substance-related 
                        disorder benefits and not distinguish 
                        in the application of such limit 
                        between such medical and surgical 
                        benefits and [mental health benefits] 
                        mental health or substance-related 
                        disorder benefits; or
                          (ii) not include any aggregate 
                        lifetime limit on [mental health 
                        benefits] mental health or substance-
                        related disorder benefits that is less 
                        than the applicable lifetime limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan or coverage that is not 
                described in subparagraph (A) or (B) and that 
                includes no or different aggregate lifetime 
                limits on different categories of medical and 
                surgical benefits, the Secretary shall 
                establish rules under which subparagraph (B) is 
                applied to such plan or coverage with respect 
                to [mental health benefits] mental health or 
                substance-related disorder benefits by 
                substituting for the applicable lifetime limit 
                an average aggregate lifetime limit that is 
                computed taking into account the weighted 
                average of the aggregate lifetime limits 
                applicable to such categories.
          (2) Annual limits.--In the case of a group health 
        plan (or health insurance coverage offered in 
        connection with such a plan) that provides both medical 
        and surgical benefits and [mental health benefits] 
        mental health or substance-related disorder benefits--
                  (A) No annual limit.--If the plan or coverage 
                does not include an annual limit on 
                substantially all medical and surgical 
                benefits, the plan or coverage may not impose 
                any annual limit on [mental health benefits] 
                mental health or substance-related disorder 
                benefits.
                  (B) Annual limit.--If the plan or coverage 
                includes an annual limit on substantially all 
                medical and surgical benefits (in this 
                paragraph referred to as the ``applicable 
                annual limit''), the plan or coverage shall 
                either--
                          (i) apply the applicable annual limit 
                        both to medical and surgical benefits 
                        to which it otherwise would apply and 
                        to [mental health benefits] mental 
                        health or substance-related disorder 
                        benefits and not distinguish in the 
                        application of such limit between such 
                        medical and surgical benefits and 
                        [mental health benefits] mental health 
                        or substance-related disorder benefits; 
                        or
                          (ii) not include any annual limit on 
                        [mental health benefits] mental health 
                        or substance-related disorder benefits 
                        that is less than the applicable annual 
                        limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan or coverage that is not 
                described in subparagraph (A) or (B) and that 
                includes no or different annual limits on 
                different categories of medical and surgical 
                benefits, the Secretary shall establish rules 
                under which subparagraph (B) is applied to such 
                plan or coverage with respect to [mental health 
                benefits] mental health or substance-related 
                disorder benefits by substituting for the 
                applicable annual limit an average annual limit 
                that is computed taking into account the 
                weighted average of the annual limits 
                applicable to such categories.
          (3) Treatment limits.--
                  (A) No treatment limit.--If the plan or 
                coverage does not include a treatment limit (as 
                defined in subparagraph (D)) on substantially 
                all medical and surgical benefits in any 
                category of items or services, the plan or 
                coverage may not impose any treatment limit on 
                mental health or substance-related disorder 
                benefits that are classified in the same 
                category of items or services.
                  (B) Treatment limit.--If the plan or coverage 
                includes a treatment limit on substantially all 
                medical and surgical benefits in any category 
                of items or services, the plan or coverage may 
                not impose such a treatment limit on mental 
                health or substance-related disorder benefits 
                for items and services within such category 
                that is more restrictive than the predominant 
                treatment limit that is applicable to medical 
                and surgical benefits for items and services 
                within such category.
                  (C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this 
                paragraph and paragraph (4), there shall be the 
                following five categories of items and services 
                for benefits, whether medical and surgical 
                benefits or mental health and substance-related 
                disorder benefits, and all medical and surgical 
                benefits and all mental health and substance 
                related benefits shall be classified into one 
                of the following categories:
                          (i) Inpatient, in-network.--Items and 
                        services not described in clause (v) 
                        furnished on an inpatient basis and 
                        within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (ii) Inpatient, out-of-network.--
                        Items and services not described in 
                        clause (v) furnished on an inpatient 
                        basis and outside any network of 
                        providers established or recognized 
                        under such plan or coverage.
                          (iii) Outpatient, in-network.--Items 
                        and services not described in clause 
                        (v) furnished on an outpatient basis 
                        and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (iv) Outpatient, out-of-network.--
                        Items and services not described in 
                        clause (v) furnished on an outpatient 
                        basis and outside any network of 
                        providers established or recognized 
                        under such plan or coverage.
                          (v) Emergency care.--Items and 
                        services, whether furnished on an 
                        inpatient or outpatient basis or within 
                        or outside any network of providers, 
                        required for the treatment of an 
                        emergency medical condition (including 
                        an emergency condition relating to 
                        mental health and substance-related 
                        disorders).
                  (D) Treatment limit defined.--For purposes of 
                this paragraph, the term ``treatment limit'' 
                means, with respect to a plan or coverage, 
                limitation on the frequency of treatment, 
                number of visits or days of coverage, or other 
                similar limit on the duration or scope of 
                treatment under the plan or coverage.
                  (E) Predominance.--For purposes of this 
                subsection, a treatment limit or financial 
                requirement with respect to a category of items 
                and services is considered to be predominant if 
                it is the most common or frequent of such type 
                of limit or requirement with respect to such 
                category of items and services.
          (4) Beneficiary financial requirements.--
                  (A) No beneficiary financial requirement.--If 
                the plan or coverage does not include a 
                beneficiary financial requirement (as defined 
                in subparagraph (C)) on substantially all 
                medical and surgical benefits within a category 
                of items and services (specified under 
                paragraph (3)(C)), the plan or coverage may not 
                impose such a beneficiary financial requirement 
                on mental health or substance-related disorder 
                benefits for items and services within such 
                category.
                  (B) Beneficiary financial requirement.--
                          (i) Treatment of deductibles, out-of-
                        pocket limits, and similar financial 
                        requirements.--If the plan or coverage 
                        includes a deductible, a limitation on 
                        out-of-pocket expenses, or similar 
                        beneficiary financial requirement that 
                        does not apply separately to individual 
                        items and services on substantially all 
                        medical and surgical benefits within a 
                        category of items and services (as 
                        specified in paragraph (3)(C)), the 
                        plan or coverage shall apply such 
                        requirement (or, if there is more than 
                        one such requirement for such category 
                        of items and services, the predominant 
                        requirement for such category) both to 
                        medical and surgical benefits within 
                        such category and to mental health and 
                        substance-related disorder benefits 
                        within such category and shall not 
                        distinguish in the application of such 
                        requirement between such medical and 
                        surgical benefits and such mental 
                        health and substance-related disorder 
                        benefits.
                          (ii) Other financial requirements.--
                        If the plan or coverage includes a 
                        beneficiary financial requirement not 
                        described in clause (i) on 
                        substantially all medical and surgical 
                        benefits within a category of items and 
                        services, the plan or coverage may not 
                        impose such financial requirement on 
                        mental health or substance-related 
                        disorder benefits for items and 
                        services within such category in a way 
                        that results in greater out-of-pocket 
                        expenses to the participant or 
                        beneficiary than the predominant 
                        beneficiary financial requirement 
                        applicable to medical and surgical 
                        benefits for items and services within 
                        such category.
                          (iii) Construction.--Nothing in this 
                        subparagraph shall be construed as 
                        prohibiting the plan or coverage from 
                        waiving the application of any 
                        deductible for mental health benefits 
                        or substance-related disorder benefits 
                        or both.
                  (C) Beneficiary financial requirement 
                defined.--For purposes of this paragraph, the 
                term ``beneficiary financial requirement'' 
                includes, with respect to a plan or coverage, 
                any deductible, coinsurance, co-payment, other 
                cost sharing, and limitation on the total 
                amount that may be paid by a participant or 
                beneficiary with respect to benefits under the 
                plan or coverage, but does not include the 
                application of any aggregate lifetime limit or 
                annual limit.
          (5) Availability of plan information.--The criteria 
        for medical necessity determinations made under the 
        plan with respect to mental health and substance-
        related disorder benefits (or the health insurance 
        coverage offered in connection with the plan with 
        respect to such benefits) shall be made available in 
        accordance with regulations by the plan administrator 
        (or the health insurance issuer offering such coverage) 
        to any current or potential participant, beneficiary, 
        or contracting provider upon request. The reason for 
        any denial under the plan (or coverage) of 
        reimbursement or payment for services with respect to 
        mental health and substance-related disorder benefits 
        in the case of any participant or beneficiary shall, 
        upon request, be made available in accordance with 
        regulations by the plan administrator (or the health 
        insurance issuer offering such coverage) to the 
        participant or beneficiary.
          (6) Minimum scope of coverage and equity in out-of-
        network benefits.--
                  (A) Minimum scope of mental health and 
                substance-related disorder benefits.--In the 
                case of a group health plan (or health 
                insurance coverage offered in connection with 
                such a plan) that provides any mental health or 
                substance-related disorder benefits, the plan 
                or coverage shall include benefits for any 
                mental health condition and substance-related 
                disorder for which benefits are provided under 
                the benefit plan option offered under chapter 
                89 of title 5, United States Code, with the 
                highest average enrollment as of the beginning 
                of the most recent year beginning on or before 
                the beginning of the plan year involved.
                  (B) Equity in coverage of out-of-network 
                benefits.--
                          (i) In general.--In the case of a 
                        plan or coverage that provides both 
                        medical and surgical benefits and 
                        mental health or substance-related 
                        disorder benefits, if medical and 
                        surgical benefits are provided for 
                        substantially all items and services in 
                        a category specified in clause (ii) 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan or coverage, the mental 
                        health and substance-related disorder 
                        benefits shall also be provided for 
                        items and services in such category 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan or coverage in 
                        accordance with the requirements of 
                        this section.
                          (ii) Categories of items and 
                        services.--For purposes of clause (i), 
                        there shall be the following three 
                        categories of items and services for 
                        benefits, whether medical and surgical 
                        benefits or mental health and 
                        substance-related disorder benefits, 
                        and all medical and surgical benefits 
                        and all mental health and substance-
                        related disorder benefits shall be 
                        classified into one of the following 
                        categories:
                                  (I) Emergency.--Items and 
                                services, whether furnished on 
                                an inpatient or outpatient 
                                basis, required for the 
                                treatment of an emergency 
                                medical condition (including an 
                                emergency condition relating to 
                                mental health or substance-
                                related disorders).
                                  (II) Inpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                inpatient basis.
                                  (III) Outpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                outpatient basis.
          (7) Construction.--Nothing in this section shall be 
        construed to limit a group health plan (or health 
        insurance offered in connection with such a plan) from 
        managing the provision of medical, surgical, mental 
        health or substance-related disorder benefits through 
        any of the following methods:
                  (A) the application of utilization review;
                  (B) the application of authorization or 
                management practices;
                  (C) the application of medical necessity and 
                appropriateness criteria; or
                  (D) other processes intended to ensure that 
                beneficiaries receive appropriate care and 
                medically necessary services for covered 
                benefits;
        to the extent such methods are recognized both by 
        industry and by providers and are not prohibited under 
        applicable State laws.
  (b) Construction.--Nothing in this section shall be 
[construed--
          [(1) as requiring] construed as requiring a group 
        health plan (or health insurance coverage offered in 
        connection with such a plan) to provide any [mental 
        health benefits; or] mental health or substance-related 
        disorder benefits.
          [(2) in the case of a group health plan (or health 
        insurance coverage offered in connection with such a 
        plan) that provides mental health benefits, as 
        affecting the terms and conditions (including cost 
        sharing, limits on numbers of visits or days of 
        coverage, and requirements relating to medical 
        necessity) relating to the amount, duration, or scope 
        of mental health benefits under the plan or coverage, 
        except as specifically provided in subsection (a) (in 
        regard to parity in the imposition of aggregate 
        lifetime limits and annual limits for mental health 
        benefits).]
  (c) Exemptions.--
          (1) Small employer exemption.--
                  (A) * * *
                  (B) Small employer.--For purposes of 
                subparagraph (A), the term ``small employer'' 
                means, in connection with a group health plan 
                with respect to a calendar year and a plan 
                year, an employer who employed an average of at 
                least 2 (or 1 in the case of an employer 
                residing in a State that permits small groups 
                to include a single individual) but not more 
                than 50 employees on business days during the 
                preceding calendar year [and who employs at 
                least 2 employees on the first day of the plan 
                year].

           *       *       *       *       *       *       *

          [(2) Increased cost exemption.--This section shall 
        not apply with respect to a group health plan (or 
        health insurance coverage offered in connection with a 
        group health plan) if the application of this section 
        to such plan (or to such coverage) results in an 
        increase in the cost under the plan (or for such 
        coverage) of at least 1 percent.]
          (2) Increased cost exemption.--
                  (A) In general.--With respect to a group 
                health plan (or health insurance coverage 
                offered in connection with such a plan), if the 
                application of this section to such plan (or 
                coverage) results in an increase for the plan 
                year involved of the actual total costs of 
                coverage with respect to medical and surgical 
                benefits and mental health and substance-
                related disorder benefits under the plan (as 
                determined and certified under subparagraph 
                (C)) by an amount that exceeds the applicable 
                percentage described in subparagraph (B) of the 
                actual total plan costs, the provisions of this 
                section shall not apply to such plan (or 
                coverage) during the following plan year, and 
                such exemption shall apply to the plan (or 
                coverage) for 1 plan year.
                  (B) Applicable percentage.--With respect to a 
                plan (or coverage), the applicable percentage 
                described in this paragraph shall be--
                          (i) 2 percent in the case of the 
                        first plan year which begins after the 
                        effective date of the amendments made 
                        by section 101 of the Paul Wellstone 
                        Mental Health and Addiction Equity Act 
                        of 2007; and
                          (ii) 1 percent in the case of each 
                        subsequent plan year.
                  (C) Determinations by actuaries.--
                Determinations as to increases in actual costs 
                under a plan (or coverage) for purposes of this 
                subsection shall be made and certified by a 
                qualified and licensed actuary who is a member 
                in good standing of the American Academy of 
                Actuaries.
                  (D) 6-month determinations.--If a group 
                health plan (or a health insurance issuer 
                offering coverage in connection with such a 
                plan) seeks an exemption under this paragraph, 
                determinations under subparagraph (A) shall be 
                made after such plan (or coverage) has complied 
                with this section for the first 6 months of the 
                plan year involved.
                  (E) Notification.--An election to modify 
                coverage of mental health and substance-related 
                disorder benefits as permitted under this 
                paragraph shall be treated as a material 
                modification in the terms of the plan as 
                described in section 102(a) and notice of which 
                shall be provided a reasonable period in 
                advance of the change.
                  (F) Notification of appropriate agency.--
                          (i) In general.--A group health plan 
                        that, based on upon a certification 
                        described under subparagraph (C), 
                        qualifies for an exemption under this 
                        paragraph, and elects to implement the 
                        exemption, shall notify the Department 
                        of Labor of such election.
                          (ii) Requirement.--A notification 
                        under clause (i) shall include--
                                  (I) a description of the 
                                number of covered lives under 
                                the plan (or coverage) involved 
                                at the time of the 
                                notification, and as 
                                applicable, at the time of any 
                                prior election of the cost-
                                exemption under this paragraph 
                                by such plan (or coverage);
                                  (II) for both the plan year 
                                upon which a cost exemption is 
                                sought and the year prior, a 
                                description of the actual total 
                                costs of coverage with respect 
                                to medical and surgical 
                                benefits and mental health and 
                                substance-related disorder 
                                benefits under the plan; and
                                  (III) for both the plan year 
                                upon which a cost exemption is 
                                sought and the year prior, the 
                                actual total costs of coverage 
                                with respect to mental health 
                                and substance-related disorder 
                                benefits under the plan.
                          (iii) Confidentiality.--A 
                        notification under clause (i) shall be 
                        confidential. The Department of Labor 
                        shall make available, upon request to 
                        the appropriate committees of Congress 
                        and on not more than an annual basis, 
                        an anonymous itemization of such 
                        notifications, that includes--
                                  (I) a breakdown of States by 
                                the size and any type of 
                                employers submitting such 
                                notification; and
                                  (II) a summary of the data 
                                received under clause (ii).
                  (G) No impact on application of state law.--
                The fact that a plan or coverage is exempt from 
                the provisions of this section under 
                subparagraph (A) shall not affect the 
                application of State law to such plan or 
                coverage.

           *       *       *       *       *       *       *

  (e) Definitions.--For purposes of this section--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Medical or surgical benefits.--The term ``medical 
        or surgical benefits'' means benefits with respect to 
        medical or surgical services, as defined under the 
        terms of the plan or coverage (as the case may be), but 
        does not include [mental health benefits] mental health 
        or substance-related disorder benefits.
          (4) [Mental health benefits] Mental health and 
        substance-related disorder benefits.--The term 
        ``[mental health benefits] mental health or substance-
        related disorder benefits'' means [benefits with 
        respect to mental health services] benefits with 
        respect to services for mental health conditions or 
        substance-related disorders, as defined under the terms 
        of the plan or coverage (as the case may be)[, but does 
        not include benefits with respect to treatment of 
        substance abuse or chemical dependency].
  [(f) Sunset.--This section shall not apply to benefits for 
services furnished after December 31, 2007.]
  (f) Preemption, Relation to State Laws.--
          (1) In general.--This part shall not be construed to 
        supersede any provision of State law which establishes, 
        implements, or continues in effect any consumer 
        protections, benefits, methods of access to benefits, 
        rights, external review programs, or remedies solely 
        relating to health insurance issuers in connection with 
        group health insurance coverage (including benefit 
        mandates or regulation of group health plans of 50 or 
        fewer employees) except to the extent that such 
        provision prevents the application of a requirement of 
        this part.
          (2) Continued preemption with respect to group health 
        plans.--Nothing in this section shall be construed to 
        affect or modify the provisions of section 514 with 
        respect to group health plans.
          (3) Other state laws.--Nothing in this section shall 
        be construed to exempt or relieve any person from any 
        laws of any State not solely related to health 
        insurance issuers in connection with group health 
        coverage insofar as they may now or hereafter relate to 
        insurance, health plans, or health coverage.

           *       *       *       *       *       *       *

                              ----------                              


             SECTION 2705 OF THE PUBLIC HEALTH SERVICE ACT

[SEC. 2705. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL 
                    HEALTH BENEFITS.]

SEC. 2705.

  (a) In General.--
          (1) Aggregate lifetime limits.--In the case of a 
        group health plan (or health insurance coverage offered 
        in connection with such a plan) that provides both 
        medical and surgical benefits and [mental health 
        benefits] mental health and substance-related disorder 
        benefits--
                  (A) No lifetime limit.--If the plan or 
                coverage does not include an aggregate lifetime 
                limit on substantially all medical and surgical 
                benefits, the plan or coverage may not impose 
                any aggregate lifetime limit on [mental health 
                benefits] mental health and substance-related 
                disorder benefits.
                  (B) Lifetime limit.--If the plan or coverage 
                includes an aggregate lifetime limit on 
                substantially all medical and surgical benefits 
                (in this paragraph referred to as the 
                ``applicable lifetime limit''), the plan or 
                coverage shall either--
                          (i) apply the applicable lifetime 
                        limit both to the medical and surgical 
                        benefits to which it otherwise would 
                        apply and to [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits and not distinguish 
                        in the application of such limit 
                        between such medical and surgical 
                        benefits and [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits; or
                          (ii) not include any aggregate 
                        lifetime limit on [mental health 
                        benefits] mental health and substance-
                        related disorder benefits that is less 
                        than the applicable lifetime limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan or coverage that is not 
                described in subparagraph (A) or (B) and that 
                includes no or different aggregate lifetime 
                limits on different categories of medical and 
                surgical benefits, the Secretary shall 
                establish rules under which subparagraph (B) is 
                applied to such plan or coverage with respect 
                to [mental health benefits] mental health and 
                substance-related disorder benefits by 
                substituting for the applicable lifetime limit 
                an average aggregate lifetime 
                limit that is computed taking into account the 
                weighted average of the aggregate lifetime 
                limits applicable to such categories.
          (2) Annual limits.--In the case of a group health 
        plan (or health insurance coverage offered in 
        connection with such a plan) that provides both medical 
        and surgical benefits and [mental health benefits] 
        mental health and substance-related disorder benefits--
                  (A) No annual limit.--If the plan or coverage 
                does not include an annual limit on 
                substantially all medical and surgical 
                benefits, the plan or coverage may not impose 
                any annual limit on [mental health benefits] 
                mental health and substance-related disorder 
                benefits.
                  (B) Annual limit.--If the plan or coverage 
                includes an annual limit on substantially all 
                medical and surgical benefits (in this 
                paragraph referred to as the ``applicable 
                annual limit''), the plan or coverage shall 
                either--
                          (i) apply the applicable annual limit 
                        both to medical and surgical benefits 
                        to which it otherwise would apply and 
                        to [mental health benefits] mental 
                        health and substance-related disorder 
                        benefits and not distinguish in the 
                        application of such limit between such 
                        medical and surgical benefits and 
                        [mental health benefits] mental health 
                        and substance-related disorder 
                        benefits; or
                          (ii) not include any annual limit on 
                        [mental health benefits] mental health 
                        and substance-related disorder benefits 
                        that is less than the applicable annual 
                        limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan or coverage that is not 
                described in subparagraph (A) or (B) and that 
                includes no or different annual limits on 
                different categories of medical and surgical 
                benefits, the Secretary shall establish rules 
                under which subparagraph (B) is applied to such 
                plan or coverage with respect to [mental health 
                benefits] mental health and substance-related 
                disorder benefits by substituting for the 
                applicable annual limit an average annual limit 
                that is computed taking into account the 
                weighted average of the annual limits 
                applicable to such categories.
          (3) Treatment limits.--
                  (A) No treatment limit.--If the plan or 
                coverage does not include a treatment limit (as 
                defined in subparagraph (D)) on substantially 
                all medical and surgical benefits in any 
                category of items or services (specified in 
                subparagraph (C)), the plan or coverage may not 
                impose any treatment limit on mental health and 
                substance-related disorder benefits that are 
                classified in the same category of items or 
                services.
                  (B) Treatment limit.--If the plan or coverage 
                includes a treatment limit on substantially all 
                medical and surgical benefits in any category 
                of items or services, the plan or coverage may 
                not impose such a treatment limit on mental 
                health and substance-related disorder benefits 
                for items and services within such category 
                that are more restrictive than the predominant 
                treatment limit that is applicable to medical 
                and surgical benefits for items and services 
                within such category.
                  (C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this 
                paragraph and paragraph (4), there shall be the 
                following four categories of items and services 
                for benefits, whether medical and surgical 
                benefits or mental health and substance-related 
                disorder benefits, and all medical and surgical 
                benefits and all mental health and substance 
                related benefits shall be classified into one 
                of the following categories:
                          (i) Inpatient, in-network.--Items and 
                        services furnished on an inpatient 
                        basis and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (ii) Inpatient, out-of-network.--
                        Items and services furnished on an 
                        inpatient basis and outside any network 
                        of providers established or recognized 
                        under such plan or coverage.
                          (iii) Outpatient, in-network.--Items 
                        and services furnished on an outpatient 
                        basis and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (iv) Outpatient, out-of-network.--
                        Items and services furnished on an 
                        outpatient basis and outside any 
                        network of providers established or 
                        recognized under such plan or coverage.
                  (D) Treatment limit defined.--For purposes of 
                this paragraph, the term ``treatment limit'' 
                means, with respect to a plan or coverage, 
                limitation on the frequency of treatment, 
                number of visits or days of coverage, or other 
                similar limit on the duration or scope of 
                treatment under the plan or coverage.
                  (E) Predominance.--For purposes of this 
                subsection, a treatment limit or financial 
                requirement with respect to a category of items 
                and services is considered to be predominant if 
                it is the most common or frequent of such type 
                of limit or requirement with respect to such 
                category of items and services.
          (4) Beneficiary financial requirements.--
                  (A) No beneficiary financial requirement.--If 
                the plan or coverage does not include a 
                beneficiary financial requirement (as defined 
                in subparagraph (C)) on substantially all 
                medical and surgical benefits within a category 
                of items and services (specified in paragraph 
                (3)(C)), the plan or coverage may not impose 
                such a beneficiary financial requirement on 
                mental health and substance-related disorder 
                benefits for items and services within such 
                category.
                  (B) Beneficiary financial requirement.--
                          (i) Treatment of deductibles, out-of-
                        pocket limits, and similar financial 
                        requirements.--If the plan or coverage 
                        includes a deductible, a limitation on 
                        out-of-pocket expenses, or similar 
                        beneficiary financial requirement that 
                        does not apply separately to individual 
                        items and services on substantially all 
                        medical and surgical benefits within a 
                        category of items and services, the 
                        plan or coverage shall apply such 
                        requirement (or, if there is more than 
                        one such requirement for such category 
                        of items and services, the predominant 
                        requirement for such category) both to 
                        medical and surgical benefits within 
                        such category and to mental health and 
                        substance-related disorder benefits 
                        within such category and shall not 
                        distinguish in the application of such 
                        requirement between such medical and 
                        surgical benefits and such mental 
                        health and substance-related disorder 
                        benefits.
                          (ii) Other financial requirements.--
                        If the plan or coverage includes a 
                        beneficiary financial requirement not 
                        described in clause (i) on 
                        substantially all medical and surgical 
                        benefits within a category of items and 
                        services, the plan or coverage may not 
                        impose such financial requirement on 
                        mental health and substance-related 
                        disorder benefits for items and 
                        services within such category in a way 
                        that is more costly to the participant 
                        or beneficiary than the predominant 
                        beneficiary financial requirement 
                        applicable to medical and surgical 
                        benefits for items and services within 
                        such category.
                  (C) Beneficiary financial requirement 
                defined.--For purposes of this paragraph, the 
                term ``beneficiary financial requirement'' 
                includes, with respect to a plan or coverage, 
                any deductible, coinsurance, co-payment, other 
                cost sharing, and limitation on the total 
                amount that may be paid by a participant or 
                beneficiary with respect to benefits under the 
                plan or coverage, but does not include the 
                application of any aggregate lifetime limit or 
                annual limit.
          (5) Availability of plan information.--The criteria 
        for medical necessity determinations made under the 
        plan with respect to mental health and substance-
        related disorder benefits (or the health insurance 
        coverage offered in connection with the plan with 
        respect to such benefits) shall be made available by 
        the plan administrator (or the health insurance issuer 
        offering such coverage) to any current or potential 
        participant, beneficiary, or contracting provider upon 
        request. The reason for any denial under the plan (or 
        coverage) of reimbursement or payment for services with 
        respect to mental health and substance-related disorder 
        benefits in the case of any participant or beneficiary 
        shall, upon request, be made available by the plan 
        administrator (or the health insurance issuer offering 
        such coverage) to the participant or beneficiary.
          (6) Minimum scope of coverage and equity in out-of-
        network benefits.--
                  (A) Minimum scope of mental health and 
                substance-related disorder benefits.--In the 
                case of a group health plan (or health 
                insurance coverage offered in connection with 
                such a plan) that provides any mental health 
                and substance-related disorder benefits, the 
                plan or coverage shall include benefits for any 
                mental health condition or substance-related 
                disorder for which benefits are provided under 
                the benefit plan option offered under chapter 
                89 of title 5, United States Code, with the 
                highest average enrollment as of the beginning 
                of the most recent year beginning on or before 
                the beginning of the plan year involved.
                  (B) Equity in coverage of out-of-network 
                benefits.--
                          (i) In general.--In the case of a 
                        plan or coverage that provides both 
                        medical and surgical benefits and 
                        mental health and substance-related 
                        disorder benefits, if medical and 
                        surgical benefits are provided for 
                        substantially all items and services in 
                        a category specified in clause (ii) 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan or coverage, the mental 
                        health and substance-related disorder 
                        benefits shall also be provided for 
                        items and services in such category 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan or coverage in 
                        accordance with the requirements of 
                        this section.
                          (ii) Categories of items and 
                        services.--For purposes of clause (i), 
                        there shall be the following three 
                        categories of items and services for 
                        benefits, whether medical and surgical 
                        benefits or mental health and 
                        substance-related disorder benefits, 
                        and all medical and surgical benefits 
                        and all mental health and substance-
                        related disorder benefits shall be 
                        classified into one of the following 
                        categories:
                                  (I) Emergency.--Items and 
                                services, whether furnished on 
                                an inpatient or outpatient 
                                basis, required for the 
                                treatment of an emergency 
                                medical condition (including an 
                                emergency condition relating to 
                                mental health and substance-
                                related disorders).
                                  (II) Inpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                inpatient basis.
                                  (III) Outpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                outpatient basis.
  (b) Construction.--Nothing in this section shall be 
[construed--
          [(1) as requiring] construed as requiring a group 
        health plan (or health insurance coverage offered in 
        connection with such a plan) to provide any [mental 
        health benefits; or] mental health and substance-
        related disorder benefits.
          [(2) in the case of a group health plan (or health 
        insurance coverage offered in connection with such a 
        plan) that provides mental health benefits, as 
        affecting the terms and conditions (including cost 
        sharing, limits on numbers of visits or days of 
        coverage, and requirements relating to medical 
        necessity) relating to the amount, duration, or scope 
        of mental health benefits under the plan or coverage, 
        except as specifically provided in subsection (a) (in 
        regard to parity in the imposition of aggregate 
        lifetime limits and annual limits for mental health 
        benefits).]
  (c) Exemptions.--
          (1) Small employer exemption.--This section shall not 
        apply to any group health plan (and group health 
        insurance coverage offered in connection with a group 
        health plan) for any plan year of a small employer.
          [(2) Increased cost exemption.--This section shall 
        not apply with respect to a group health plan (or 
        health insurance coverage offered in connection with a 
        group health plan) if the application of this section 
        to such plan (or to such coverage) results in an 
        increase in the cost under the plan (or for such 
        coverage) of at least 1 percent.]
          (2) Increased cost exemption.--
                  (A) In general.--With respect to a group 
                health plan (or health insurance coverage 
                offered in connection with such a plan), if the 
                application of this section to such plan (or 
                coverage) results in an increase for the plan 
                year involved of the actual total costs of 
                coverage with respect to medical and surgical 
                benefits and mental health and substance-
                related disorder benefits under the plan (as 
                determined and certified under subparagraph 
                (C)) by an amount that exceeds the applicable 
                percentage described in subparagraph (B) of the 
                actual total plan costs, the provisions of this 
                section shall not apply to such plan (or 
                coverage) during the following plan year, and 
                such exemption shall apply to the plan (or 
                coverage) for 1 plan year.
                  (B) Applicable percentage.--With respect to a 
                plan (or coverage), the applicable percentage 
                described in this paragraph shall be--
                          (i) 2 percent in the case of the 
                        first plan year which begins after the 
                        date of the enactment of the Paul 
                        Wellstone Mental Health and Addiction 
                        Equity Act of 2007; and
                          (ii) 1 percent in the case of each 
                        subsequent plan year.
                  (C) Determinations by actuaries.--
                Determinations as to increases in actual costs 
                under a plan (or coverage) for purposes of this 
                subsection shall be made by a qualified actuary 
                who is a member in good standing of the 
                American Academy of Actuaries. Such 
                determinations shall be certified by the 
                actuary and be made available to the general 
                public.
                  (D) 6-month determinations.--If a group 
                health plan (or a health insurance issuer 
                offering coverage in connection with such a 
                plan) seeks an exemption under this paragraph, 
                determinations under subparagraph (A) shall be 
                made after such plan (or coverage) has complied 
                with this section for the first 6 months of the 
                plan year involved.
                  (E) Notification.--A group health plan under 
                this part shall comply with the notice 
                requirement under section 712(c)(2)(E) of the 
                Employee Retirement Income Security Act of 1974 
                with respect to the a modification of mental 
                health and substance-related disorder benefits 
                as permitted under this paragraph as if such 
                section applied to such plan.

           *       *       *       *       *       *       *

  (e) Definitions.--For purposes of this section--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Medical or surgical benefits.--The term ``medical 
        or surgical benefits'' means benefits with respect to 
        medical or surgical services, as defined under the 
        terms of the plan or coverage (as the case may be), but 
        does not include [mental health benefits] mental health 
        and substance-related disorder benefits.
          (4) [Mental health benefits] Mental health and 
        substance-related disorder benefits.--The term 
        ``[mental health benefits] mental health and substance-
        related disorder benefits'' means [benefits with 
        respect to mental health services] benefits with 
        respect to services for mental health conditions or 
        substance-related disorders, as defined under the terms 
        of the plan or coverage (as the case may be), but does 
        not include benefits with respect to treatment of 
        substance abuse or chemical dependency.
  [(f) Sunset.--This section shall not apply to benefits for 
services furnished after December 31, 2007.]
  (f) Preemption, Relation to State Laws.--
          (1) In general.--Nothing in this section shall be 
        construed to preempt any State law that provides 
        greater consumer protections, benefits, methods of 
        access to benefits, rights or remedies that are greater 
        than the protections, benefits, methods of access to 
        benefits, rights or remedies provided under this 
        section.
          (2) Construction.--Nothing in this section shall be 
        construed to affect or modify the provisions of section 
        2723 with respect to group health plans.
                              ----------                              


INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *


Subtitle K--Group Health Plan Requirements

           *       *       *       *       *       *       *


CHAPTER 100--GROUP HEALTH PLAN REQUIREMENTS

           *       *       *       *       *       *       *


                    Subchapter B--Other Requirements

     * * * * * * *
[Sec. 9812. Parity in the application of certain limits to mental health 
          benefits.]
Sec. 9812. Equity in mental health and substance-related disorder 
          benefits.

           *       *       *       *       *       *       *


[SEC. 9812. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL 
                    HEALTH BENEFITS.]

SEC. 9812. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER 
                    BENEFITS.

  (a) In General.--
          (1) Aggregate lifetime limits.--In the case of a 
        group health plan that provides both medical and 
        surgical benefits and [mental health benefits] mental 
        health and substance-related disorder benefits--
                  (A) No lifetime limit.--If the plan does not 
                include an aggregate lifetime limit on 
                substantially all medical and surgical 
                benefits, the plan may not impose any aggregate 
                lifetime limit on [mental health benefits] 
                mental health and substance-related disorder 
                benefits.
                  (B) Lifetime limit.--If the plan includes an 
                aggregate lifetime limit on substantially all 
                medical and surgical benefits (in this 
                paragraph referred to as the ``applicable 
                lifetime limit''), the plan shall either--
                          (i) apply the applicable lifetime 
                        limit both to the medical and surgical 
                        benefits to which it otherwise would 
                        apply and to [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits and not distinguish 
                        in the application of such limit 
                        between such medical and surgical 
                        benefits and [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits; or
                          (ii) not include any aggregate 
                        lifetime limit on [mental health 
                        benefits] mental health and substance-
                        related disorder benefits that is less 
                        than the applicable lifetime limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan that is not described in 
                subparagraph (A) or (B) and that includes no or 
                different aggregate lifetime limits on 
                different categories of medical and surgical 
                benefits, the Secretary shall establish rules 
                under which subparagraph (B) is applied to such 
                plan with respect to [mental health benefits] 
                mental health and substance-related disorder 
                benefits by substituting for the applicable 
                lifetime limit an average aggregate lifetime 
                limit that is computed taking into account the 
                weighted average of the aggregate lifetime 
                limits applicable to such categories.
          (2) Annual limits.--In the case of a group health 
        plan that provides both medical and surgical benefits 
        and [mental health benefits] mental health and 
        substance-related disorder benefits--
                  (A) No annual limit.--If the plan does not 
                include an annual limit on substantially all 
                medical and surgical benefits, the plan may not 
                impose any annual limit on [mental health 
                benefits] mental health and substance-related 
                disorder benefits.
                  (B) Annual limit.--If the plan includes an 
                annual limit on substantially all medical and 
                surgical benefits (in this paragraph referred 
                to as the ``applicable annual limit''), the 
                plan shall either--
                          (i) apply the applicable annual limit 
                        both to medical and surgical benefits 
                        to which it otherwise would apply and 
                        to [mental health benefits] mental 
                        health and substance-related disorder 
                        benefits and not distinguish in the 
                        application of such limit between such 
                        medical and surgical benefits and 
                        [mental health benefits] mental health 
                        and substance-related disorder 
                        benefits; or
                          (ii) not include any annual limit on 
                        [mental health benefits] mental health 
                        and substance-related disorder benefits 
                        that is less than the applicable annual 
                        limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan that is not described in 
                subparagraph (A) or (B) and that includes no or 
                different annual limits on different categories 
                of medical and surgical benefits, the Secretary 
                shall establish rules under which subparagraph 
                (B) is applied to such plan with respect to 
                [mental health benefits] mental health and 
                substance-related disorder benefits by 
                substituting for the applicable annual limit an 
                average annual limit that is computed taking 
                into account the weighted average of the annual 
                limits applicable to such categories.
          (3) Treatment limits.--
                  (A) No treatment limit.--If the plan does not 
                include a treatment limit (as defined in 
                subparagraph (D)) on substantially all medical 
                and surgical benefits in any category of items 
                or services (specified in subparagraph (C)), 
                the plan may not impose any treatment limit on 
                mental health and substance-related disorder 
                benefits that are classified in the same 
                category of items or services.
                  (B) Treatment limit.--If the plan includes a 
                treatment limit on substantially all medical 
                and surgical benefits in any category of items 
                or services, the plan may not impose such a 
                treatment limit on mental health and substance-
                related disorder benefits for items and 
                services within such category that are more 
                restrictive than the predominant treatment 
                limit that is applicable to medical and 
                surgical benefits for items and services within 
                such category.
                  (C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this 
                paragraph and paragraph (4), there shall be the 
                following four categories of items and services 
                for benefits, whether medical and surgical 
                benefits or mental health and substance-related 
                disorder benefits, and all medical and surgical 
                benefits and all mental health and substance 
                related benefits shall be classified into one 
                of the following categories:
                          (i) Inpatient, in-network.--Items and 
                        services furnished on an inpatient 
                        basis and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (ii) Inpatient, out-of-network.--
                        Items and services furnished on an 
                        inpatient basis and outside any network 
                        of providers established or recognized 
                        under such plan or coverage.
                          (iii) Outpatient, in-network.--Items 
                        and services furnished on an outpatient 
                        basis and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (iv) Outpatient, out-of-network.--
                        Items and services furnished on an 
                        outpatient basis and outside any 
                        network of providers established or 
                        recognized under such plan or coverage.
                  (D) Treatment limit defined.--For purposes of 
                this paragraph, the term ``treatment limit'' 
                means, with respect to a plan, limitation on 
                the frequency of treatment, number of visits or 
                days of coverage, or other similar limit on the 
                duration or scope of treatment under the plan.
                  (E) Predominance.--For purposes of this 
                subsection, a treatment limit or financial 
                requirement with respect to a category of items 
                and services is considered to be predominant if 
                it is the most common or frequent of such type 
                of limit or requirement with respect to such 
                category of items and services.
          (4) Beneficiary financial requirements.--
                  (A) No beneficiary financial requirement.--If 
                the plan does not include a beneficiary 
                financial requirement (as defined in 
                subparagraph (C)) on substantially all medical 
                and surgical benefits within a category of 
                items and services (specified in paragraph 
                (3)(C)), the plan may not impose such a 
                beneficiary financial requirement on mental 
                health and substance-related disorder benefits 
                for items and services within such category.
                  (B) Beneficiary financial requirement.--
                          (i) Treatment of deductibles, out-of-
                        pocket limits, and similar financial 
                        requirements.--If the plan or coverage 
                        includes a deductible, a limitation on 
                        out-of-pocket expenses, or similar 
                        beneficiary financial requirement that 
                        does not apply separately to individual 
                        items and services on substantially all 
                        medical and surgical benefits within a 
                        category of items and services, the 
                        plan or coverage shall apply such 
                        requirement (or, if there is more than 
                        one such requirement for such category 
                        of items and services, the predominant 
                        requirement for such category) both to 
                        medical and surgical benefits within 
                        such category and to mental health and 
                        substance-related disorder benefits 
                        within such category and shall not 
                        distinguish in the application of such 
                        requirement between such medical and 
                        surgical benefits and such mental 
                        health and substance-related disorder 
                        benefits.
                          (ii) Other financial requirements.--
                        If the plan includes a beneficiary 
                        financial requirement not described in 
                        clause (i) on substantially all medical 
                        and surgical benefits within a category 
                        of items and services, the plan may not 
                        impose such financial requirement on 
                        mental health and substance-related 
                        disorder benefits for items and 
                        services within such category in a way 
                        that is more costly to the participant 
                        or beneficiary than the predominant 
                        beneficiary financial requirement 
                        applicable to medical and surgical 
                        benefits for items and services within 
                        such category.
                  (C) Beneficiary financial requirement 
                defined.--For purposes of this paragraph, the 
                term ``beneficiary financial requirement'' 
                includes, with respect to a plan, any 
                deductible, coinsurance, co-payment, other cost 
                sharing, and limitation on the total amount 
                that may be paid by a participant or 
                beneficiary with respect to benefits under the 
                plan, but does not include the application of 
                any aggregate lifetime limit or annual limit.
          (5) Availability of plan information.--The criteria 
        for medical necessity determinations made under the 
        plan with respect to mental health and substance-
        related disorder benefits shall be made available by 
        the plan administrator to any current or potential 
        participant, beneficiary, or contracting provider upon 
        request. The reason for any denial under the plan of 
        reimbursement or payment for services with respect to 
        mental health and substance-related disorder benefits 
        in the case of any participant or beneficiary shall, 
        upon request, be made available by the plan 
        administrator to the participant or beneficiary.
          (6) Minimum scope of coverage and equity in out-of-
        network benefits.--
                  (A) Minimum scope of mental health and 
                substance-related disorder benefits.--In the 
                case of a group health plan (or health 
                insurance coverage offered in connection with 
                such a plan) that provides any mental health 
                and substance-related disorder benefits, the 
                plan or coverage shall include benefits for any 
                mental health condition or substance-related 
                disorder for which benefits are provided under 
                the benefit plan option offered under chapter 
                89 of title 5, United States Code, with the 
                highest average enrollment as of the beginning 
                of the most recent year beginning on or before 
                the beginning of the plan year involved.
                  (B) Equity in coverage of out-of-network 
                benefits.--
                          (i) In general.--In the case of a 
                        plan that provides both medical and 
                        surgical benefits and mental health and 
                        substance-related disorder benefits, if 
                        medical and surgical benefits are 
                        provided for substantially all items 
                        and services in a category specified in 
                        clause (ii) furnished outside any 
                        network of providers established or 
                        recognized under such plan or coverage, 
                        the mental health and substance-related 
                        disorder benefits shall also be 
                        provided for items and services in such 
                        category furnished outside any network 
                        of providers established or recognized 
                        under such plan in accordance with the 
                        requirements of this section.
                          (ii) Categories of items and 
                        services.--For purposes of clause (i), 
                        there shall be the following three 
                        categories of items and services for 
                        benefits, whether medical and surgical 
                        benefits or mental health and 
                        substance-related disorder benefits, 
                        and all medical and surgical benefits 
                        and all mental health and substance-
                        related disorder benefits shall be 
                        classified into one of the following 
                        categories:
                                  (I) Emergency.--Items and 
                                services, whether furnished on 
                                an inpatient or outpatient 
                                basis, required for the 
                                treatment of an emergency 
                                medical condition (including an 
                                emergency condition relating to 
                                mental health and substance-
                                related disorders).
                                  (II) Inpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                inpatient basis.
                                  (III) Outpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                outpatient basis.
  (b) Construction.--Nothing in this section shall be 
[construed--
          [(1) as requiring] construed as requiring a group 
        health plan to provide any [mental health benefits; or] 
        mental health and substance-related disorder benefits.
          [(2) in the case of a group health plan that provides 
        mental health benefits, as affecting the terms and 
        conditions (including cost sharing, limits on numbers 
        of visits or days of coverage, and requirements 
        relating to medical necessity) relating to the amount, 
        duration, or scope of mental health benefits under the 
        plan, except as specifically provided in subsection (a) 
        (in regard to parity in the imposition of aggregate 
        lifetime limits and annual limits for mental health 
        benefits).]
  (c) Exemptions.--
          [(1) Small employer exemption.--This section shall 
        not apply to any group health plan for any plan year of 
        a small employer (as defined in section 4980D(d)(2)).
          [(2) Increased cost exemption.--This section shall 
        not apply with respect to a group health plan if the 
        application of this section to such plan results in an 
        increase in the cost under the plan of at least 1 
        percent.]
          (1) Small employer exemption.--
                  (A) In general.--This section shall not apply 
                to any group health plan for any plan year of a 
                small employer.
                  (B) Small employer.--For purposes of 
                subparagraph (A), the term ``small employer'' 
                means, with respect to a calendar year and a 
                plan year, an employer who employed an average 
                of at least 2 (or 1 in the case of an employer 
                residing in a State that permits small groups 
                to include a single individual) but not more 
                than 50 employees on business days during the 
                preceding calendar year. For purposes of the 
                preceding sentence, all persons treated as a 
                single employer under subsection (b), (c), (m), 
                or (o) of section 414 shall be treated as 1 
                employer and rules similar to rules of 
                subparagraphs (B) and (C) of section 
                4980D(d)(2) shall apply.
          (2) Increased cost exemption.--
                  (A) In general.--With respect to a group 
                health plan, if the application of this section 
                to such plan results in an increase for the 
                plan year involved of the actual total costs of 
                coverage with respect to medical and surgical 
                benefits and mental health and substance-
                related disorder benefits under the plan (as 
                determined and certified under subparagraph 
                (C)) by an amount that exceeds the applicable 
                percentage described in subparagraph (B) of the 
                actual total plan costs, the provisions of this 
                section shall not apply to such plan during the 
                following plan year, and such exemption shall 
                apply to the plan for 1 plan year.
                  (B) Applicable percentage.--With respect to a 
                plan, the applicable percentage described in 
                this paragraph shall be--
                          (i) 2 percent in the case of the 
                        first plan year which begins after the 
                        date of the enactment of the Paul 
                        Wellstone Mental Health and Addiction 
                        Equity Act of 2007; and
                          (ii) 1 percent in the case of each 
                        subsequent plan year.
                  (C) Determinations by actuaries.--
                Determinations as to increases in actual costs 
                under a plan for purposes of this subsection 
                shall be made by a qualified actuary who is a 
                member in good standing of the American Academy 
                of Actuaries. Such determinations shall be 
                certified by the actuary and be made available 
                to the general public.
                  (D) 6-month determinations.--If a group 
                health plan seeks an exemption under this 
                paragraph, determinations under subparagraph 
                (A) shall be made after such plan has complied 
                with this section for the first 6 months of the 
                plan year involved.

           *       *       *       *       *       *       *

  (e) Definitions.--For purposes of this section:
          (1) * * *

           *       *       *       *       *       *       *

          (3) Medical or surgical benefits.--The term ``medical 
        or surgical benefits'' means benefits with respect to 
        medical or surgical services, as defined under the 
        terms of the plan, but does not include [mental health 
        benefits] mental health and substance-related disorder 
        benefits.
          (4) [Mental health benefits] Mental health and 
        substance-related disorder benefits.--The term 
        ``[mental health benefits] mental health and substance-
        related disorder benefits'' means [benefits with 
        respect to mental health services] benefits with 
        respect to services for mental health conditions or 
        substance-related disorders, as defined under the terms 
        of the plan, but does not include benefits with respect 
        to treatment of substance abuse or chemical dependency.
  [(f) Application of section.--This section shall not apply to 
benefits for services furnished--
          [(1) on or after September 30, 2001, and before 
        January 10, 2002,
          [(2) on or after January 1, 2004, and before the date 
        of the enactment of the Working Families Tax Relief Act 
        of 2004, and
          [(3) after December 31, 2007.]

           *       *       *       *       *       *       *


                     XIII. Committee Correspondence

    None.

                             Minority Views

                              INTRODUCTION

    The goal of providing parity between mental health benefits 
and other medical benefits provided under employer-sponsored 
health coverage is something that all Members of the Committee 
and, we believe, most Members of Congress, would endorse. In 
the 110th Congress, competing legislative proposals in the 
House and Senate offer substantially different approaches in 
addressing this issue. It is our belief that the proposal 
advancing in the Senate is a far superior one to that of the 
House. Accordingly, we set forth these views to express our 
concerns with the House bill, and urge that as the legislative 
process moves forward, the House brings its efforts in line 
with that of the other body.
    As a principal committee of jurisdiction, the Committee on 
Education and Labor has long been involved in the mental health 
parity debate. Full mental health parity bills have been 
introduced in prior Congresses but have not been enacted into 
law, largely because of the serious concerns associated with 
these proposals and the opposition to imposition of additional 
federal coverage mandates on employers, who continue to 
struggle to provide affordable, high-quality coverage to their 
employees. In the 110th Congress, mental health parity 
legislation is moving closer toward passage.
    The current parity bills, H.R. 1424 in the House and S. 558 
in the Senate, represent two significantly different approaches 
to the issue of achieving mental health parity in employer-
sponsored coverage. H.R. 1424, as reported by the Committee, 
more closely reflects prior failed efforts--it involved 
virtually no input from those parties responsible for complying 
with the mandates (employers, insurers, e.g.), and is, not 
surprisingly, strongly opposed by those parties. In stark 
contrast, the Senate bill, S. 558, reflects a carefully 
negotiated consensus of all major stakeholders on all sides of 
the mental health parity debate.
    Members on both sides of the aisle can in good conscience 
and good faith disagree on the merits of both pending bills. 
However, there can be little legitimate debate that the Senate 
bill, offered as the Republican Substitute at full Committee 
markup on July 18, 2007 by Representative John Kline, is the 
only proposal that achieves exactly what all parties 
purportedly intend: full parity between mental health and other 
medical benefits. H.R. 1424, in contrast, grants preferential 
treatment for mental health benefits and as such, constitutes 
bad policy. Accordingly, and for the reasons set forth below, 
we oppose its passage.

         FEDERAL LAW ON THE PROVISION OF MENTAL HEALTH BENEFITS

    The provision of health benefits by employers to their 
employees is generally governed by the Employee Retirement 
Income Security Act (``ERISA''). In 1996, Congress enacted the 
Mental Health Parity Act (``MHPA''), which amended ERISA and 
established new federal standards for mental health coverage 
offered by group health plans.\1\ The MHPA added section 712 of 
ERISA to create certain requirements for mental health 
coverage, if this coverage was offered by a health plan. Under 
the MHPA, health plans are not required to offer mental health 
benefits. However, plans that do choose to provide mental 
health benefits are prohibited from imposing lower annual and 
lifetime dollar limits on these benefits than the limits placed 
on medical and surgical benefits. Under current law, the MHPA's 
parity requirements do not apply to substance abuse or chemical 
dependency treatment.
---------------------------------------------------------------------------
    \1\ On the state level, all states except Wyoming have passed 
mental health parity laws which require state law-governed health plans 
to provide varying degrees of mental health coverage, subject these 
plans to certain financial limits, or otherwise mandate mental health 
benefits. Employers with fully-insured and self-insured plans that are 
regulated under ERISA (and thus the MHPA) are not bound by these state 
laws, and therefore not subject to these state mandates. Thus, actions 
taken by the Committee to amend ERISA will, of necessity, have far-
reaching consequences.
---------------------------------------------------------------------------
    The MHPA's standards apply only to private-sector, 
employer-sponsored group health plans, including both fully-
insured and self-insured plans, but not to the individual (non-
group) health insurance market. Employers retain discretion 
regarding the extent and scope of mental health benefits 
offered to workers and their families, including cost sharing 
and requirements relating to medical necessity. Also, certain 
plans may be exempt from the MHPA. For instance, a small 
employer exception provides that plans covering employers with 
50 or fewer employees are exempt from compliance. In addition, 
the MHPA permits employers to ``opt-out'' of the MHPA's 
requirements if they experience an increase in claims costs of 
at least one percent as a result of compliance. The provisions 
of the MHPA were originally set to expire in 2001, but have 
been routinely reauthorized on an annual basis, with the 
current authorization expiring on December 31, 2007.

                EXECUTIVE ACTION ON MENTAL HEALTH PARITY

    In 1999, President Clinton issued an executive order that 
implemented full parity for both mental health and substance 
abuse benefits in health plans offered under the Federal 
Employees Health Benefits Program (FEHBP) beginning in 2001. 
These benefits cover all medically necessary treatments for all 
categories of mental illnesses listed in the Diagnostic and 
Statistical Manual of Mental Disorders (DSM-IV).\2\ Under the 
FEHBP, mental health parity is required only for services 
provided on an in-network basis (i.e., through a specific group 
of providers contracted by a managed health care organization 
and/or an insurance carrier to provide services to participants 
in that particular plan). Further, the FEHBP plans engage in 
medical management practices to ensure appropriate diagnosis 
and treatment of mental health conditions.\3\ The Office of 
Personnel Management estimated that implementation of the order 
resulted in an average premium increase of 1.64 percent for 
fee-for-service plans and 0.3 percent for HMOs.
---------------------------------------------------------------------------
    \2\ The Diagnostic and Statistical Manual of Mental Disorders is 
produced by the American Psychiatric Association and is a comprehensive 
system of diagnosis for psychiatric conditions. The fourth (IV) edition 
was published in 1995, and is the most current edition.
    \3\ In general, the term ``medical management'' is used to describe 
practices designed to ensure appropriate diagnosis and treatment of 
medical conditions, and to improve efficiency and quality in the 
delivery of medical services. Such practices include utilization 
review, case management, disease management, and quality management.
---------------------------------------------------------------------------
    While endorsing in principle the concept of mental health 
parity, the current Administration has not yet endorsed any 
particular bill, including H.R. 1424 or S. 558.

                      FEDERAL LEGISLATIVE ACTIVITY

Senate legislation

    In the 110th Congress, the Mental Health Parity Act of 
2007, S. 558, was introduced by Senators Pete Domenici (R-NM), 
Ted Kennedy (D-MA), and Mike Enzi (R-WY) on February 12, 2007. 
The Senate Health, Education, Labor, and Pensions (``HELP'') 
Committee approved the measure, as amended, on February 14, 
2007. The Senate bill was the product of negotiations between 
patient advocates, behavioral health providers, insurers, and 
business groups (collectively, the ``Fairness Coalition''). \4\
---------------------------------------------------------------------------
    \4\ Members of the Fairness Coalition include the following health 
care provider and mental health advocacy groups: the American Hospital 
Association, the American Medical Association, the American Psychiatric 
Association, the American Psychological Association, the Association 
for Behavioral Health and Wellness, the Federation of American 
Hospitals, Mental Health America, National Alliance on Mental Illness, 
and the National Association of Psychiatric Health Systems.
---------------------------------------------------------------------------
    S. 558 generally requires health insurance plans that offer 
mental health coverage to provide that coverage on par with 
financial and treatment coverage offered for other physical 
illnesses, The Senate bill would not mandate that plans provide 
specific mental health benefits; however, fully insured plans, 
which remain subject to state insurance laws, would still be 
required to comply with state-specific benefit requirements. S. 
558 also would specifically ensure that medical management of 
mental health benefits and negotiation of separate 
reimbursement or provider payment rates is not prohibited, 
meaning that employers and health plans could maintain 
flexibility in forming behavioral health care provider 
networks. Finally, the Senate bill, as introduced, would 
preempt state parity laws that could impact fully-insured plans 
governed by ERISA, but would largely leave benefit mandates 
intact.
    The Congressional Budget Office (``CBO'') scored S. 558 and 
concluded that it would result in a 0.4 percent increase in 
employer-sponsored premiums. This was estimated to amount to 
$1.5 billion in 2009 and $3.4 billion in 2013. Also, for the 
five-year period 2008-2012, CBO estimated a $1 billion decrease 
in direct revenues (resulting from increased premium 
deductions), $280 million in increased direct spending 
(Medicaid managed care), and $150 million in increased 
appropriations.\5\
---------------------------------------------------------------------------
    \5\ See, Congressional Budget Office, Cost Estimate, S. 558 Mental 
Health Parity Act of 2007, dated March 20, 2007.
---------------------------------------------------------------------------
    Additional discussions and negotiations involving S. 558 
have continued subsequent to the HELP Committee's markup, and 
have resulted in slight revisions to S. 558 as reported out of 
committee in the form of a proposed ``manager's amendment'' for 
Senate Floor consideration. However, this has not changed the 
support of the Fairness Coalition for that bill. In fact, the 
parties that negotiated the manager's amendment sent the 
following letter to Senators Kennedy, Enzi, and Domenici:


    All but two of the provider and advocacy groups of the 
Fairness Coalition involved in the negotiation of the Senate 
manager's amendment--Mental Health America and the American 
Medical Association--signed the June 14 letter above; however, 
those two groups have not withdrawn their support for the 
Senate manager's amendment.

House Legislation

    On March 7, 2007, Representatives Patrick Kennedy (D-RI) 
and Jim Ramstad (R-MN) introduced H.R. 1424, the Paul Wellstone 
Mental Health and Addiction Equity Act of 2007. This bill 
amends ERISA, the Public Health Service Act, and the Internal 
Revenue Code, and was referred to the Committees on Education 
and Labor, Energy and Commerce, and Ways and Means, As a matter 
of policy, the bill raises a number of substantive concerns.
    As introduced, H.R.. 1424 purports to achieve mental health 
parity by prohibiting treatment limits or the imposition of 
financial requirements on mental health and substance-related 
disorder benefits within group health plans if those 
requirements and limitations are not similarly imposed on 
medical and surgical benefits under such plans. The bill would 
impose a further, broad mandate by requiring that where a plan 
covers any behavioral health disorder, it must cover all 
currently recognized conditions listed in the DSM-IV. This 
mandate would include requiring coverage for certain disorders, 
such as ``caffeine intoxication'' and ``circadian rhythm sleep 
disorder (jet lag).'' H.R. 1424 eliminates a plan's flexibility 
to determine covered benefits. Under the bill, plans would not 
be specifically permitted to engage in medical management 
practices and negotiate separate reimbursement or provider 
payment rates. H.R. 1424 would mandate out-of-network coverage 
for mental health and substance-related disorders, if such 
coverage is provided for emergency, inpatient or outpatient 
services.
    Finally, and perhaps most importantly, on the issue of 
ERISA preemption, H.R. 1424 would give states the authority to 
enact greater consumer protections, benefits, methods of access 
to benefits, rights or remedies than those contained in the 
federal bill. The bill, if enacted, would establish a benefit 
``floor'' while permitting states to impose broader mental 
health coverage mandates, creating inconsistent and confusing 
regulatory schemes. At the same time, this provision allows 
state enforcement and remedy schemes to be established which 
would apply to certain fully-insured plans, only for mental 
health benefits but not other medical benefits. Such plans have 
operated under the exclusive jurisdiction and remedies set 
forth under ERISA, which has existed and has been interpreted 
by the courts for over three decades.
    CBO has not scored H.R. 1424. However, considering the CBO 
score for S. 558 and the broader employer mandate set forth in 
H.R. 1424, it is likely that H.R. 1424's costs would meet or 
exceed those of the Senate bill.

Legislative hearing on H.R. 1424

    On July 10, 2007, the Committee on Education and Labor 
Subcommittee on Health, Education, Labor, and Pensions held a 
legislative hearing on H.R. 1424. At that hearing, 
Representatives Kennedy and Ramstad testified, as did Former 
First Lady Rosalyn Carter, mental health advocates, an economic 
analyst, and the Commissioner of Insurance for the State of 
Wisconsin. Additional witnesses included Jon Breyfogle, an 
attorney that represented the American Benefits Council, and E. 
Neil Trautwein, who represented the National Retail Federation 
(``NRF''). The hearing focused on the specific provisions of 
the House bill, but also featured robust discussion of the 
Senate proposal.
    Mr. Trautwein testified as to why the NRF opposes H.R. 
1424, but also as to the reasons why that group supports the 
proposed manager's amendment to S. 558. In his testimony, Mr. 
Trautwein raised a number of concerns regarding the provisions 
of H.R. 1424, including its broad coverage mandate, ERISA 
preemption and the role of the states, inadequate medical 
management protections, and the mandate to provide out-of-
network coverage. Importantly, he outlined the collaborative 
Senate process that resulted in a balanced parity bill. In his 
own words:

    The mental health parity debate has been both long and 
fierce. have been an advocate in this debate for a number of 
years, both before and after the 1996 law addressing parity in 
annual and lifetime limits. We all have contributed heated 
rhetoric to this debate. Unfortunately, it has really obscured 
our shared objective of helping individuals get the coverage 
and care they needed.
    It is this last point that has encouraged a running 
dialogue between the advocates and Senate sponsors. I have been 
privileged to have participated over a number of years as a 
principal representative of the employer community in intense 
discussions and negotiations with both the Senate sponsors as 
well as advocates for the mental health and addiction 
communities. I would like to give special thanks to Senators 
Ted Kennedy (D-MA), Michael Enzi (R-WY) and Pete Domenici (R-
NM) for their longstanding advocacy on this legislation as well 
as for their willing ear and fair and responsive negotiations 
through the years.
    The Senate compromise that I have highlighted throughout 
this testimony is the product of those negotiations. It has 
also created a broad coalition among erstwhile opponents--
surely somewhat of a distinction.
    NRF is joined in this coalition not only by traditional 
allies like the American Benefits Council, Aetna, the U.S. 
Chamber of Commerce and the National Association of 
Manufacturers (among others) but also by the National Alliance 
on Mental Illness, the American Psychiatric and the American 
Psychological Associations and the American Hospital 
Association and the Federation of American Hospitals (among 
others). I have attached a copy of our joint letter at the 
conclusion of my testimony. I respectfully ask that it be made 
part of the hearing record.\6\
---------------------------------------------------------------------------
    \6\ Testimony of E. Neil Trautwein, testifying on behalf of the 
National Retail Federation, Committee on Education and Labor, 
Subcommittee on Health, Education, Labor, and Pensions Hearing, ``The 
Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 
1424),'' (July 10, 2007) at 3-4 (emphasis added).

    Mr. Breyfogle, an employment benefits practitioner with 
decades of experience, explained to the Subcommittee the 
reasons underlying support for the Senate bill, and specific 
concerns with the House bill. In particular, Mr. Breyfogle 
expressed concerns with H.R. 1424's ERISA preemption 
---------------------------------------------------------------------------
provisions. As Mr. Breyfogle testified:

    We have significant concerns with the provisions in the 
House parity bill which would authorize States to provide 
``greater consumer protections, benefits, methods of access to 
benefits, rights or remedies'' than the provisions set out in 
the legislation. Clearly, this language gives States the 
ability to develop parity laws, at least for fully insured 
health plans, that are more extensive than the federal 
standards provided in the House bill. We prefer the approach 
adopted in the Senate bill, which would establish uniform 
federal parity rules applicable to treatment limitations and 
financial requirements for both self-insured and insured plans 
while preserving the traditional authority of States to require 
fully insured plans to provide mental health coverage.
    The more troubling aspect of this provision in the House 
bill is that it opens the door for greater State law remedies 
for disputes involving mental health benefits for participants 
in insured plans. The Supreme Court has issued numerous rulings 
making clear that ERISA's enforcement scheme is exclusive for 
both fully insured and self-insured plans and completely 
preempts alternative State remedial schemes. It makes no sense 
whatsoever to allow access to State law remedies for one 
category of benefits--i.e., participants in fully insured plans 
for disputes over mental health benefits. To the extent the 
House bill is interpreted to revise remedies for all types of 
benefit disputes, H.R. 1424 is certainly not the vehicle to do 
so. The debate over ERISA's remedies has occurred over many 
years, generally in the context of the Patients' Bill of 
Rights. Such a fundamental issue as ERISA's remedial scheme 
should not be an adjunct to a bill whose purpose is to address 
mental health parity.
    The uniformity that ERISA establishes for employer-
sponsored coverage, including its enforcement and remedies 
scheme, is sound public policy and is something employers 
consider crucial to their voluntary decision to offer health 
coverage to their employees. If Congress believes that changes 
are needed in this area, such changes should be debated on 
their own merits rather than included as one of many provisions 
of a mental health parity bill.\7\
---------------------------------------------------------------------------
    \7\ Testimony of Jon W. Breyfogle, Esq., testifying on behalf of 
the American Benefits Council, Committee on Education and Labor, 
Subcommittee on Health, Education, Labor, and Pensions Hearing, ``The 
Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 
1424),'' (July 10, 2007) at 7 (emphasis added).

    Although testimony was received from other witnesses at the 
hearing in favor of mental health parity legislation, the main 
points raised by Mr. Trautwein and Mr. Breyfogle regarding the 
differences and impacts of the House and Senate bills remained 
largely unrebutted, or at best were the subject of legitimate 
disagreement among experts. Accordingly, credible testimony at 
the July 10, 2007 hearing established that H.R. 1424 did not 
accomplish mental health parity in a balanced and thoughtful 
manner, and that significant concerns remained regarding the 
imposition of mandated benefits. Notwithstanding (or possibly 
because of) these legitimate concerns, on July 12 the Democrat 
majority scheduled a full committee markup of H.R. 1424 for 
July 18, 2007. The Majority provided the final draft of the 
Chairman's Amendment to H.R. 1424 approximately twelve hours 
before the full committee markup.

Full Committee markup

    On Wednesday, July 18, 2007, eight days after the 
Subcommittee hearing, the full Committee on Education and Labor 
met to consider and mark up H.R. 1424. An Amendment in the 
Nature of a Substitute to H.R. 1424 was offered by Chairman 
Miller (the ``Miller Amendment'') and was adopted without 
objection. A Substitute Amendment to the Miller Amendment was 
offered by Representative Kline which was rejected on a 
rollcall vote of 16 to 25. The Committee favorably reported 
H.R. 1424, as amended by the Miller Amendment, on a rollcall 
vote of 33 to 9.
            Amendment in the Nature of a Substitute to H.R. 1424, 
                    offered by Mr. George Miller of California
    At the full Committee markup, Chairman Miller offered an 
Amendment in the Nature of a Substitute to H.R. 1424 (``the 
Miller Amendment''). The Miller Amendment set forth minor 
revisions primarily to Section 2 of H.R. 1424. The late evening 
of July 17 was the first time that Minority Members and staff 
were afforded the opportunity to review legislative text 
purporting to address concerns associated with H.R. 1424.
    Among its provisions, the Miller Amendment adds ``emergency 
care'' to the categories of items and services for application 
of treatment limits and beneficiary financial requirements. In 
an apparent attempt to address testimony received at the July 
10 Subcommittee hearing, the Miller Amendment includes a new 
provision regarding medical management which provides that 
nothing in the bill shall limit a group health plan from 
managing, using certain methods, the provision of medical, 
surgical, mental health or substance-related disorder benefits, 
to the extent the methods are recognized and not prohibited 
under state laws. The Amendment makes modest revisions to the 
notice requirements under the cost exemption section.
    The Miller Amendment appears to seek to clarify the bill's 
preemption section relating to state laws, ostensibly to 
address concerns raised regarding the impact of H.R. 1424's 
broad provision permitting state laws to supersede the federal 
ERISA law. Specifically, section 2(i) of the Miller Amendment 
provides that the bill shall not be construed to supersede 
``any provision of State law which establishes, implements, or 
continues in effect any consumer protections, benefits, methods 
of access to benefits, rights, external review programs, or 
remedies solely relating to health insurance issuers in 
connection with group health insurance coverage (including 
benefit mandates or regulation of group health plans of 50 or 
fewer employees) except to the extent that such provision 
prevents the application of a requirement of this part.'' It is 
further stated that nothing in the section would affect or 
modify the provision of ERISA Section 514 with respect to group 
health plans.
    The Miller Amendment adds a special rule for collective 
bargaining agreements that would generally preclude application 
of the bill's requirements until after expiration of the 
agreement or January 1, 2010, whichever is later. It adds a 
requirement on the Department of Labor to randomly sample group 
health plan compliance with the parity bill's requirements, and 
to provide ``assistance'' to participants and beneficiaries who 
have any questions or problems with compliance with the bill's 
requirements. Finally, in a revision to section 5 of H.R. 1424, 
the Miller Amendment directs the Department of Labor, rather 
than the Comptroller General, to prepare biannual reports to 
Congress on access to coverage.
    The Miller Amendment attempts to address some of the 
significant concerns raised with H.R. 1424. Despite good 
intent, however, the original bill remains largely unchanged, 
and the Miller Amendment does not provide sufficient clarity 
necessary to resolve some of the most troubling substantive 
concerns with the House legislation.
            Kline Substitute Amendment
    As discussed above, over the last two years significant 
progress on the issue of mental health parity has been made 
through the efforts of a bipartisan group of Senators (Kennedy, 
Enzi, and Domenici, among others) and a diverse and 
representative group of mental health advocates, health care 
providers, business groups and insurers. The unprecedented 
agreement reached among this bipartisan group is reflected in 
S. 558, with subsequent minor changes contained in the proposed 
manager's amendment to that bill.
    In order to support the good policy and balanced compromise 
between all parties interested in achieving true mental health 
parity, which is and should be the goal of any legislation, Mr. 
Kline offered a substitute amendment at the full committee 
markup of H.R. 1424 (the ``Kline Substitute''). The Kline 
Substitute embodies the proposed manager's amendment to S. 558.
    The Kline Substitute addresses many of the concerns raised 
by the House bill. The Kline Substitute does not mandate that 
health plans cover specific mental health benefits, makes clear 
that medical management of mental health benefits and core 
payment and contracting issues necessary for success are not 
prohibited, and does not mandate costly out-of-network 
coverage. Further, the Kline Substitute ensures that ERISA 
preemption requirements are maintained and strengthened, in 
order to assure a uniform federal rule for the comprehensive 
and strong parity benefits provided by the bill. As such, it 
provides broad new parity requirements to participants in 
insured plans in approximately eight states that currently have 
no parity requirement and expands upon the parity requirements 
applicable to insured plans in approximately seventeen other 
states. It does this while ensuring that states can continue 
their tradition role of regulating benefits provided under 
insurance policies in all other respects.
    It is important to note that, regardless of whether they 
support or oppose H.R. 1424, all of the parties involved in the 
Senate negotiations strongly support enactment of the manager's 
amendment of S. 558 into law this year.
    The Kline Substitute was rejected on a rollcall vote of 16 
to 25, with every Democrat present voting against it. The 
Democrats' rejection of a broad-based and well-balanced 
substitute, which is publicly supported by mainstream mental 
health advocates and providers, threatens to undo the careful 
balance struck among all parties interested in this issue, and 
will make passage of meaningful mental health parity 
legislation this year exceedingly difficult.

                            REPUBLICAN VIEWS

    Committee Republicans are united in their desire to achieve 
parity between mental health and other medical benefits. 
However, the significant differences in current legislative 
efforts, as discussed herein, may only serve to frustrate this 
goal.
    Notwithstanding the rhetoric from supporters of H.R. 1424 
and the Miller Amendment (hereafter collectively, unless 
specified otherwise, ``H.R. 1424'') which purports to 
characterize that legislation as providing ``parity,'' H.R. 
1424 does nothing of the sort. In fact, largely because of the 
defined benefit and preemption provisions, H.R. 1424 would 
create a situation in which employer-sponsored plans would 
likely have to provide significantly greater mental and 
behavioral health benefits as compared to other medical 
benefits. This, for example, raises a question of fundamental 
fairness, left unanswered by the Majority: Why should those who 
potentially suffer from mental and behavioral illnesses be 
entitled to greater employer-sponsored benefits than an 
individual suffering from another medical condition, such as 
cancer?
    As set forth below, H.R. 1424's flaws are numerous. As 
such, it should be rejected by the House.

H.R. 1424 imposes a benefit mandate that defines covered illnesses too 
        broadly

    Under H.R. 1424, every mental illness identified by the 
mental health profession through the DSM-IV would be required 
to be covered by health plans. Even the vast majority of states 
currently do not mandate this type of coverage. Further, H.R. 
1424 applies no similar requirement on any other category of 
medical benefits covered by a plan (hospital services, 
physician services, drug benefits, or any other category of 
benefits), many of which involve serious medical conditions. At 
the same time, an employer is obligated to provide coverage for 
disorders such as ``caffeine intoxication'' and ``jet lag,'' 
which raises serious questions about the validity of the 
conditions to be covered by this bill. The Majority apparently 
believes that ``caffeine intoxication'' and ``jet lag'' are the 
types of disorders that are worthy of a federal coverage 
mandate on employer-sponsored plans.
    Beyond the questionable nature of some of the ``disorders'' 
that would be required to be covered, H.R. 1424 does not create 
parity between medical/surgical and mental health conditions 
which must be covered by a plan. Rather, at bottom, it is a 
preferential benefit mandate in favor of mental health 
conditions, which would override many existing state mandates 
for insurance plans that require coverage of a specific list of 
behavioral health and substance abuse conditions.
    The Majority may argue that beneficiaries in private, 
employer-sponsored plans should be entitled coverage for the 
same illnesses covered by the FEHBP. However, this argument is 
misleading. Simply because the federal government, through an 
executive order issued by then-President Clinton, chose to 
provide such coverage does not mean all employer-sponsored 
plans should be mandated by the federal government to do the 
same. Employers, like the federal government, are in the best 
position to assess the needs of their covered populations, and 
should be permitted to exercise their discretion to voluntarily 
assume which illnesses they choose to cover. It was for that 
reason that the Kline Substitute preserved the ability of group 
plans to use their discretion in determining covered benefits, 
and preserved the ability of states to mandate benefits only in 
certain circumstances.

H.R. 1424 significantly weakens ERISA preemption

    Under the House bill as introduced, states would be 
authorized to enact ``greater consumer protections, benefits, 
methods of access to benefits, rights or remedies'' than the 
provisions set out in the legislation. This would give states 
the ability to develop parity laws, at least for fully insured 
health plans, that are more extensive than the federal 
standards provided in the House bill. A further concern is that 
virtually limitless state law remedies could be available to 
participants in insured plans for disputes involving mental 
health benefits.
    The Miller Amendment appears to attempt to correct these 
flaws by inserting new language relating to ERISA preemption, 
and its relation to state laws. The Majority may attempt to 
argue that this new language is consistent with provisions of 
the Health Insurance Portability and Accountability Act that 
have been in effect for many years. However, a close reading of 
the language reveals the potential for a substantial weakening 
of ERISA preemption. For example, the new language fails to 
clarify Congressional intent with sufficient specificity, as 
set forth in the Kline Substitute, that if any provision of a 
state law is preempted, any remaining provision of such law 
shall remain in effect and not be preempted. In addition, the 
claim by the Majority that the new language provides no new 
litigation rights for participants is questionable at best, if 
not simply incorrect. The new language specifically provides 
that any provision of state law that establishes, implements or 
continues ``any consumer protections, benefits, methods of 
access to benefits, rights, external review programs, or 
remedies'' is not superseded. Although the new language limits 
the provision to group health insurance, and ostensibly 
continues ERISA preemption with respect to group health plans, 
this point will undoubtedly be the subject of litigation, and 
raises the substantial possibility of a significant erosion of 
ERISA preemption developed by court precedent over more than 30 
years, Accordingly, the Miller Amendment creates the potential 
for confusing and conflicting state laws, and makes employer-
sponsored plans subject to increased costs.
    If the Majority is truly interested in preserving ERISA 
preemption and not creating more expansive rights and remedies 
only for mental health benefits, as they stated at the full 
Committee markup, they simply would have sought to adopt the 
preemption language of the Kline Substitute, which is 
acceptable to interested stakeholders on both sides of this 
debate.\8\ The failure to do so suggests that the Majority is 
more interested in expanding rights and remedies and fueling 
litigation for a specific and narrow class of benefits.
---------------------------------------------------------------------------
    \8\ We note that there has been significant debate regarding the 
impact of S. 558 on ERISA preemption. See, Mila Kofman, Letter to 
Speaker Nancy Pelosi (June 15, 2007) and Sara Rosenbaum, JD, Letter to 
Senators Pete Domenici, Edward Kennedy and Michael Enzi (June 27, 
2007). Negotiations over this particular provision continue, and will 
hopefully be resolved to the satisfaction of all stakeholders.
---------------------------------------------------------------------------

H.R. 1424 does not adequately address medical management of claims

    Apparently in response to testimony received from 
Republican witnesses at the Subcommittee hearing, H.R. 1424 as 
reported contains specific language which appears to attempt to 
authorize the use of medical management practices for mental 
health benefits. However, it still omits a key component that 
helps improve the effectiveness of medical management 
practices, which is contained in the Kline Substitute.
    Specifically, H.R. 1424 does not make clear that under its 
provisions group health plans are not prohibited from 
negotiating separate reimbursement or provider payment rates 
and service delivery systems for different benefits. This 
provision, combined with the specific authorization of medical 
management practices, would serve to provide group health plans 
with the tools necessary to appropriately manage and deliver 
mental and behavioral health care benefits. Further, given that 
such contracting practices are in use in the FEHBP, the 
Majority's failure to include this specific authorization is 
inexplicable. As such, H.R. 1424 fails to protect the core 
payment and contracting practices that are essential to 
successful medical management programs that control cost and 
quality of benefits, and is therefore deficient.

H.R. 1424 mandates out-of-network coverage

    H.R. 1424 mandates out-of-network coverage if a plan 
provides coverage for substantially all medical and surgical 
services in either emergency, inpatient or outpatient services. 
This is not ``parity,'' since it limits the ability of 
employer-sponsored plans to design benefit programs. Also, it 
exceeds the FEHBP requirement to provide parity only for in-
network services. Although the Majority references the FEHBP 
program as the standard by which private plans should operate, 
they selectively exclude those portions of the FEHBP program 
which do not further the Majority's goals. This provision 
should be rejected.

Employer mandates will increase costs and decrease coverage

    There is no debate over whether H.R. 1424 will increase the 
costs of employer-sponsored group health plan premiums. It 
will, and testimony from the Majority's own witnesses confirm 
this fact. The only question involves how much will premium 
costs increase as a result of this mandate. At the Subcommittee 
hearing, the Majority cited testimony from an allegedly 
independent analysis of H.R. 1424 that found a premium cost 
increase of approximately 0.6 percent for ``typical'' plans, 
and 0.1 percent if medical management practices are adopted. 
However, this analysis was not prepared by CBO, and can by no 
means be considered ``independent'' in that it was prepared by 
a paid actuarial consultant for several behavioral health 
organizations interested in passage of H.R. 1424. Also, the 
Miller Amendment fails to fully authorize medical management 
practices. Further, even under this analysis many group health 
plans, especially smaller plans, may experience cost increases 
significantly above the increase for a ``typical'' plan.
    Although there can be legitimate debate over the extent of 
cost increases, there should be no debate that imposing 
mandates increases costs and likely decreases the affordability 
and quality of coverage provided. Although when viewed in 
isolation, coverage mandates may appear to be more economically 
feasible and desirable, we remain concerned that the Majority 
will continue to consider the future imposition of additional 
coverage mandates. The cumulative costs associated with these 
mandates will have a detrimental impact on the quality and 
affordability of health care benefits. This appears to be 
contrary to the shared goal of all Members to expand access to 
affordable, high quality coverage.

                               CONCLUSION

    As we noted at the outset, the goal of providing parity 
between mental health benefits and other medical benefits 
provided under employer-sponsored health coverage is something 
that all Members of the Committee, and many in Congress, would 
likely endorse. There have been significant advances in 
diagnosis and treatment of mental and behavioral health 
disorders, and Committee Republicans generally believe that 
mental health benefits should be provided on the same terms as 
medical and surgical benefits. We recognize the two current 
legislative proposals, H.R. 1424 and S. 558, offer 
substantially different approaches toward achieving parity.
    However, only one bill, S. 558, before this Committee as 
the Kline Substitute at markup, achieves true parity and 
represents the product of two years of negotiation and 
agreement among a diverse group of interested stakeholder in 
this debate. The authors of H.R. 1424 did not involve all 
interested stakeholders, and the legislation appears to place 
mental health benefits in a more favored posture than all other 
medical benefits. Further, although attempts were made at full 
Committee markup to improve the bill, despite these efforts, it 
remains fundamentally flawed. If passed by the House, H.R. 
1424, which differs substantially with legislation that could 
pass the Senate, will only serve to complicate enactment of 
mental health parity legislation this year.
    For all of the reasons stated above, we oppose the passage 
of H.R. 1424.

                                   Howard P. ``Buck'' McKeon.
                                   Thomas E. Petri.
                                   Peter Hoekstra.
                                   Mark E. Souder.
                                   Judy Biggert.
                                   John Kline.
                                   Luis G. Fortuno.
                                   Charles W. Boustany, Jr.
                                   David Davis.
                                   Timothy Walberg.